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Will 2024 be the year to Refinance?


In the wake of the unprecedented events of 2020, interest rates plummeted, offering a golden opportunity for homeowners to secure 30-year fixed-rate mortgages at extremely low interest rates. For those who locked in at historic lows, refinancing might not be the most practical choice, but for recent homebuyers, especially as experts speculate a downward trend coming, 2024 could be an opportune time to explore the benefits of a rate and term refinance.


Should You Refinance?


Refinancing your mortgage involves replacing your existing home loan with a new one, typically to reduce interest rates, alter the loan term, or tap into home equity. Given market predictions for 2024, homeowners who purchased their properties at peak rates might find a rate and term refinance advantageous.


The Landscape of Mortgage Refinancing


1. Refinancing to Lower Your Interest Rate: Lowering your interest rate, especially if rates have decreased or your credit score has improved, is a compelling reason to refinance. Lowering your interest rate might not only save you money, but it could also accelerate home equity growth and reduce monthly mortgage payments.


2. Refinancing to Shorten Your Loan Term: Choosing a shorter loan term, such as transitioning from a 30-year to a 15-year mortgage, may increase monthly payments but could significantly reduce the total interest paid over the life of the loan. While not suitable for everyone due to higher monthly costs, it can lead to substantial savings for those who can afford it.


3. Refinancing to a Fixed-Rate Loan vs. an Adjustable-Rate Mortgage (ARM): Switching from an ARM to a fixed-rate mortgage is a common move, especially when faced with potential rate hikes. A fixed-rate mortgage provides stability, ensuring your interest rate remains constant throughout the loan term. Conversely, switching from a fixed-rate mortgage to an ARM can be advantageous during falling interest rates, but it's essential to assess long-term cost savings.


4. Refinancing When Your Credit Score Increases: Improving your credit score can open the door to a lower interest rate, making it an opportune time to refinance. Lenders view a higher credit score as an indication of lower risk, potentially leading to better loan terms.


5. Refinancing to Switch Loan Types: Refinancing allows you to transition from government-backed loans (FHA, VA, USDA) to conventional mortgages, potentially securing better interest rates and eliminating higher insurance costs associated with government-backed loans.


6. Refinancing to Tap Into Home Equity: For homeowners with accumulated equity, a cash-out refinance enables access to additional funds. Whether for debt consolidation, major purchases, or home improvements, this option allows you to leverage your property's value.


If you’re interested in learning more about refinancing this year, contact us today!

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