Do’s and don’ts of refinancing

written by JENNIFER BLAKE

REALTOR, LICENSED IN MD. AND PA. SULLIVAN SELECT LLC

Mortgage interest rates are at an all-time low, with unprecedented rates. Perhaps you’re wondering if it’s time to refinance your loan. Lenders advertising their refinancing services make it sound as easy as filling out a form and paying less each month. Though that might be true, there are some things you should consider.

Not all loans are structured the same, so it’s important to compare options. Even loans with the same interest rate can have different costs, fees and terms.

Interest rates are not the only consideration when deciding to refinance. If you are seven years into a 30-year loan, restarting the clock with a new 30-year loan can cost you thousands of dollars. In most cases, it is best to avoid refinancing with a longer term than your current loan.

Another point to consider is that the pandemic has created instability in the job market. Consider your employment situation carefully before using precious savings for loan costs. Additionally, if you are moving from a 30-year to a 15-year loan, your payment might increase. Make sure you have the income to comfortably pay the additional amount each month.

“You may have the opportunity to lower your monthly payment, shorten your loan term, reduce or remove PMI (private mortgage insurance), consolidate other high-interest rate debt and even take cash out for home improvements or other needs,” said Cathy Ocharzak of First Home Mortgage in Hagerstown. “A common question is ‘Do I need an appraisal?’ Some programs will not require an appraisal if you are reducing the payment only. However, with home values increasing, if you are taking cash out or removing PMI, you may want to have an appraisal completed to benefit from higher values currently.” Ocharzak also said to consider that you will have closing costs, including attorney, lender, appraisal and recording fees; and escrows for taxes and insurance. These often are included in the new loan. Generally, you will skip one mortgage payment and receive a refund of the escrow account balance from the mortgage you are paying off after closing on the new one. Make sure you will keep your home long enough to at least break even on the costs to refinance. If you sell in six months, for example, refinancing probably would not be a good option. Your lender will be able to review the possibilities and options to best assist with your financial needs. Please consider all aspects of refinancing before you decide to be star-struck by the extremely low rates being advertised. This is, however, a great time to refinance, considering such exceptional rates. Do your homework and decide if refinancing is beneficial for you. Stay safe, stay healthy and make this a great year to make your money work for you. — Places

For more information, contact Jennifer Blake, Sullivan Select LLC, 13146 Pennsylvania Ave., Hagerstown Jenblakehomesales@gmail.com Office phone: 301-745-5500 | Cell: 410-746-4420