Today’s low mortgage rates are certainly an opportunity worth grabbing. You’ve been putting down payments on that home for five years. It could be tempting to see if refinancing can help ease the burden of paying that loan.
If you have an existing FHA home loan, refinancing could be a great option if any of these three scenarios are applicable to you.
1. Planning to stay in the home for at least seven years
Mortgage experts say that people stay in their homes for seven years, on average. If you plan to live in the property for that long and haven’t been paying it for very long, refinancing would be a good option.
2. When you have little to no equity
A borrower who has paid off the equity in his home would only end up paying more money for a longer period of time if he opts to refinance. But if you are someone who has not built up equity on that mortgage and is currently paying at a high interest, then consider getting a refi by all means.
3. A drastic change in finances
Your current financial situation is another major factor when deciding to refinance. If you were laid off a few years back and now working at a number of odd jobs, refinancing to a product with a more flexible payment structure might make more sense. You could opt for an interest-only loan instead. This allows you to make payments on the interest only for the duration of the loan term.
A word of caution
Refinancing, when done right, can save you a lot in the long run. If you have the financial resources now, you could even save yourself from making payments for the next decade or so. Should you find yourself in any of the scenarios described above, do you research before jumping the gun. Review your loan documents to make sure that you won’t be charged for refinancing an existing home loan. Finally, shop around and compare rates. Your lender might have a good offer, but there’s a chance you can find something better out there.