The Federal Reserve raised its interest rate in March and then raised it again another half of a percentage point in early May. This was the largest increase that the bank has approved in more than 20 years. This move has a profound impact on anyone who borrows money, including homeowners considering refinancing their home. You may be wondering: does it make sense for a homeowner to refinance in this environment of rising interest rates? The answer is that it depends on the individual homeowner’s situation.
Reasons Why Refinancing Make Sense
Some homeowners have adjustable rate mortgages (ARMs). With an ARM, there is typically a very low introductory rate, followed by a much higher longer-term rate, which adjusts annually based on the Federal Reserve rate. If the introductory rate portion of your ARM has ended, your interest rate will continue to rise with the Federal Reserve rate. While the Federal Reserve rate is currently higher than it was a few months ago, it is expected to continue to rise even higher throughout the year. Therefore, refinancing now to a fixed rate mortgage, before rates rise again, could be a smart move for consumers who currently have an ARM.
Another set of homeowners who could benefit from refinancing are those that have FHA mortgages. One of the requirements of FHA mortgages is that homeowners must pay for private mortgage insurance (PMI) each month in addition to their mortgage payment. If your financial situation has changed since you originally received your FHA mortgage and you are now eligible for a conventional mortgage that does not require you to pay for PMI each month, you may benefit from refinancing to a fixed rate conventional mortgage. If you currently have a FHA mortgage but are not sure if you qualify for a conventional mortgage without a monthly PMI payment, contact Choice Mortgage Group today. Our friendly and knowledgeable loan originators will discuss the details of your financial situation with you and advise you if you are a candidate for this type of refinancing.
In either of these situations, it will be important to consider all costs involved with refinancing the loans. While you may have a lower monthly cost due to the lack of a PMI payment or due to a stable interest rate, you will have to pay closing costs on your new loan, which could add up to several thousand dollars. You will need to determine if the new, lower monthly costs make up for the upfront closing costs. Never fear though – you don’t have to do this alone. Your Choice Mortgage Group loan originator will help you calculate the most cost-efficient option.
With interest rates rising, the decision of whether to refinance is trickier than it has been in the past. Contact Choice Mortgage Group today to learn about your options for refinancing and if this could help you save money on your mortgage.
Since 1995, Choice Mortgage Group has been providing homeowners with the best real estate financing programs available. As a licensed lender, we offer a wide variety of services and programs that satisfy the unique needs of each of our clients.
Specializing in residential mortgage lending for over 25 years, our programs include conventional and government lending, purchases, and refinances. We also offer portfolio lending for self-employed borrowers and borrowers with complicated tax situations. South Florida is where Choice Mortgage Group started, and we like to call it home. We are devoted Florida Atlantic University Owls fans and are proud to be the official mortgage lender of FAU Athletics. We also support numerous other local organizations. For more information about Choice Mortgage Group, visit www.choicemortgage.com.
Choice Mortgage Group
2424 N Federal Hwy
Boca Raton, FL 33431
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