Should You Refinance Now?
Things are looking up for homeowners in Phoenix and Arizona.
Home values are on the rise – a recent survey from Zillow.com and feedback from local housing experts project that metro Phoenix home prices will continue to increase 2 to 3.6 percent by early 2015.
Sale prices are up – according to The Arizona Republic’s Home Values Survey, for the first time since 2004-06, almost every community in metro Phoenix posted at least a double-digit increase in median home-sales prices in 2012. As a result, refinancing is popular again — more than 10,000 homeowners in the region refinanced their mortgages every month during the first quarter of 2013.
If you’re in a similar situation with your home value, you may be wondering if it’s time for you to refinance your mortgage. Consider these questions before beginning the process.
Have the rates fallen far enough?
Mortgage rates fluctuate on daily basis, driven by national and regional market forces. So as you’re watching them go up and down, keep in mind that refinancing your mortgage makes more sense if you can lower your interest rate by at least 2 points, which is a safe rule of thumb. However, other real estate experts say you can consider refinancing with a 1 ½-point decrease if you plan to remain in your home for at least three years, according to Nationwide.com.
Are you planning to move soon?
The migratory trends in the U.S. indicate that Arizonians don’t move often, but they do welcome lots of new neighbors. Forbes.com reported that 46,700 people moved into the state in 2013. If you also plan to stay put, it may be a good time to refinance because you want to remain in your home long enough to recoup the closing costs and experience the savings benefit.
Just as with an original mortgage, a refinancing requires application, escrow and title fees, along with appraisal and loan origination fees, points for your mortgage loan and possibly other costs. The national average for closing costs on a $200,000 loan was $3,754, per Bankrate’s 2012 closing cost survey, which didn’t include taxes, insurance or prepaid items.
Let’s say by refinancing, your monthly payment goes down by $157. At that savings rate, it would take you 24 months of lower payments to recoup the average closing costs. Several refinancing calculators, include one from Desert Financial Credit Union, are available to help you figure out how long before you break even.
Tip: Be wary of “no-cost refinancing” claims, as Bankrate.com and Forbes.com report that there is no such thing. The closing costs are instead built into the terms of the new loan.
How good is your credit?
Before you begin shopping around, know how well your own financial picture looks. Getting your credit history and credit score in great shape will help you get a better refinancing rate. See where you stand by requesting a free credit report from the credit bureaus at www.annualcreditreport.com or www.gofreecredit.com, and be prepared to pay about $20 to obtain a one-time “snap shot” of your credit score from MyFICO.com.
If your score has improved significantly since originating your current mortgage, it may be a good time to refinance.
OK, you’ve compared your mortgage rate to current rates, figured out how long you’re staying in your home, and improved your credit score. If you’ve decided that now is a good time to refinance, you can apply online, visit your nearest branch or call 602-433-HOME (4663) and let us evaluate your mortgage situation and opportunities.