Mortgage Rates Fall: Should You Refinance?

After Feds set interest rates to below 2.25-2.50% on July 27, 2022 – highest annual rate in some 40 years. Many homeowners rushed to refinance their mortgages effectively lowering their monthly payments by hundreds of dollars. Should a mortgage refinance be in your future?
The Cost of a Mortgage Refinance

The biggest thing standing between you and a new mortgage is the cost. Remember the fees you paid when you closed on your home, those are the same fees you’ll pay when you refinance your mortgage. So, refinancing your mortgage will cost thousands of dollars – 3% to 6% of your loan amount, according to National City Mortgage, headquartered in Miamisburg, Ohio.

Whether the cost outweighs the benefit depends on how much you save each month on your mortgage payments and how long you plan to stay in your house. For example, if you pay $2,500 in fees to refinance your mortgage and lower your monthly payment by $200, it will take you just more than a year to break even. It only makes sense to refinance your mortgage if you plan to stay in your home longer than the time to break even. If you’re in it for the long haul, refinancing your mortgage is definitely something you can consider.
Who Can Refinance Their Mortgage?

While mortgage refinancing is perhaps just as attractive, it’s not as easy as it was during the height of the credit boom. First, refinancing options are far more limited with only 15-year and 30-year fixed-rate mortgages available. It makes sense though, since most homeowners want to refinance their way out of the unpredictable adjustable rate mortgages that played a major role in the current economic crisis.

Not only are there fewer choices of loans for refinancing, qualification is also more difficult. Borrowers need to have 10%-20% equity in their homes or a down payment of that amount.

As always credit history plays a major role in qualifying for a mortgage refinance. Borrowers should have good-to-excellent credit scores to get the best rates on a new loan. Subprime refinance loans are rare, perhaps even impossible.
Watch Out for Prepayment Penalties

If your current mortgage has a prepayment penalty, it could cost you more to get out of your current mortgage and into a new one. Work with your lender to negotiate an elimination of the penalty.…

Year-End Credit Report Review

By federal law, you’re able to receive a free annual credit report from each of the three credit bureaus – Equifax, Experian, and TransUnion. If you haven’t looked at your credit report all year, now’s a good time to order it. You can start the year off on the right credit foot.

The credit report won’t come to you automatically. Instead, you can check your free annual credit report at annual credit report without a credit card and without signing up for any kind of subscription service. Your credit reports will be available for download the same day you order them.

Once you get your credit report, you should review it thoroughly to make sure all the information included is accurate.

Make sure all the accounts that are being reported actually belong to you. Transposed social security numbers and other identity mix-ups can put someone else’s account on your credit report. You can have those removed. If you believe you’ve been a victim of identity theft, you should take extra steps to correct the situation. Make sure each account’s payment history is accurately reported. Payment history has the biggest impact on your credit score. Inaccurately reported late payments will undeservedly cost credit score points.

Make sure the current balances and credit limits are correct. Your level of debt is the other big player in your credit score. As your balances get closer to your credit limit, your credit score starts to drop. Inaccurately reported credit card balances and limits could have the same effect.

You can have errors removed from your credit report by writing to the credit bureaus and providing proof of the errors.…