BOULDER, CO, Apr 26, 2024—If you're a seasoned homeowner, you may have heard the term “refinancing” thrown around. But what exactly is refinancing, and is it right for you? Below, Phil Boren, Broker Associate of RE/MAX of Boulder, Inc. explores the ins and outs.
“With a refinancing, you pay off an old loan on your home and take out a new one, usually at a lower mortgage interest rate,” explains Boren. “To refinance, you will generally need to have equity in your home, a good credit rating, and steady income. You can borrow a percentage of the equity to cover remodeling costs, debt consolidate, and college tuition.”
It's important to note that a refinance isn't free. When you refinance, you will incur all the closing costs that go along with getting a new mortgage, so unless you’re doing extensive renovations and can get a mortgage interest rate at least two points below your current loan rate, you may want to select another financing option.
So why refinance? “Many people flock to refinance while mortgage interest rates are low, particularly when rates are about two percentage points below their existing home loans,” says Boren.
Other factors, like when to finance, will depend on how long you plan to hold on to your home and whether you have to pay considerable fees to refinance. It will also depend on how far along you are in paying off your current mortgage.
“If you expect to sell your home relatively soon, you’re not likely to recoup the costs you incurred to refinance,” warns Boren. “And if you are more than halfway through paying your current mortgage, you probably will gain little by refinancing.”
However, if you are going to own your home for at least another five years, that is probably long enough to recoup any refinancing costs and realize real savings as a result of lowering your monthly payment.
Contact your lender, and its competitors, before you refinance.
For more real estate information, please contact RE/MAX of Boulder, Inc. at philboren@gmail.com, 303-441-5647, or RE/MAX of Boulder, Inc..
Phil Boren is a 26-year veteran real estate Broker and Realtor, specializing in consulting with buyers and sellers in Boulder, CO and along the Front Range of Northern Colorado. Held Real Estate Broker's license in Texas, California and Colorado; Managing Broker for over 200 agents and Brokers for Century 21 and RE/MAX franchises. Award-winning Realtor with experience in management, sales, marketing, relocation, appraisal, REO, BPO's, foreclosures, short sales; previously held the MAI designation from the Appraisal Institute. Experienced in both residential and commercial real estate and achieved the No. 14 individual ranking in the 5-state, Mt. States Region for RE/MAX International in 2001, based on sales volume. Received my BSBA in Finance and Real Estate from the University of Arkansas in Fayetteville, where he was a 4-year starter and 4-year football letterman for Hall-of-Fame coach, Lou Holtz.