When the Federal Reserve dropped interest rates in response to COVID-19, homeowners began to contemplate whether or not it made sense to refinance their mortgage. There are many factors to consider. If you’re worried about meeting in-person to refinance your mortgage, know that many lenders provide the experience virtually. “You can work with your loan officer online, via the bank’s loan portal, email, phone, and even video call, so you get an in-person feeling but keep it virtual,” says Aaron Tyler, (NMLS #130688) Mortgage Loan Officer at U.S. Bank.
Before you refinance, consider your goals for refinancing. Do you want to reduce the amount of interest you pay over the loan term? Are you consolidating debts at a lower interest rate? Do you want to reduce your monthly payment? Knowing your goals will help determine the best type of refinance for your situation and decide whether any closing costs are worth it.
If any of the following situations apply, refinancing may not be the best choice at this time:
When reviewing refinancing options, consider whether you want a shorter term to pay off the loan more quickly or a longer term to lower your payment. Many mortgages come in 15-, 20- or 30-year terms. Also, consider the closing costs, interest rates and your ultimate goals for refinancing.
There’s also more than one type of refinance. You may want to do a cash-out refinance if you owe less than what the home is worth, or you may want to consolidate debt or borrow against your home equity.
Navigate your financial well-being throughout the COVID-19 situation here.