Home Buying Process

20 Year Refinance Rates

mortgage refinancing how to know whenEveryone loves saving money, especially when it comes to most homeowners’ largest monthly expense: the mortgage. Maybe you’re looking to cut that bill by refinancing your mortgage. Or maybe you’re thinking about refinancing because you’re afraid interest rates are heading up and it’s your last chance to grab a better deal.

Mortgage rates are still historically low and you may have plenty of loan options, but take some time to figure out whether refinancing is your best move right now. How long you plan to stay in your home, your financial goals and your credit profile all play a role in your decision about whether — and when — to refinance.

To get an idea of when it makes sense to refinance your home, we talked to two lending experts: Katie Miller, vice president of mortgage lending with Navy Federal Credit Union in Vienna, Virginia, and Tony Julianelle, Denver area sales manager for home mortgages with Wells Fargo.

Here are a few questions you should ask yourself to help decide whether now is a good time to refinance:

Will mortgage rates rise soon?

In other words, don’t expect a quick rise that will price you out of refinancing your home anytime soon. There’s still time for you to pay off high-interest debts or boost your credit score — and better position yourself to qualify for a good refinance loan.

“Rates are still quite low, and we’re seeing a good number of refinance applications coming in, ” Miller says. She adds that many people who purchased at the market peak only to see housing prices crash have finally regained enough equity in their homes to benefit from a refinance. “We are seeing more people take advantage of low interest rates with cash-out refinancing to pay for home improvements.”

Mortgage rates are forecast to increase slightly in 2016, but until they reach 5% or more, Miller says, you’ll likely get a competitive rate as long as your credit score is good and you show proof of steady income. (Tip: Using a mortgage calculator can help you get a sense of what kind of rates you might expect.)

How much would I save on my monthly payment?

To calculate your potential savings, you’ll need to add up your costs of refinancing, such as an appraisal, a credit check, origination fees and closing costs. Also, check whether you face a penalty for paying off your current loan early. Then, when you find out what interest rate you could qualify for on a new loan, you’ll be able to calculate your new monthly payment and see how much, if anything, you’ll save each month.

You’ll also want to consider whether you have at least 20% equity in your home — the difference between its market value and what you owe. Check the property values in your neighborhood to determine how much your home might appraise for now. Don’t rely on online home value estimates alone — they’re often way off — but online sites can point out recent sale prices for similar homes near you. A local real estate agent can give you an idea of what your home’s worth, too.

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