Mortgage rates in the Beehive State have been rising for a while. But as historically expected, a period of relief arrived. The Fed pumped the brakes on rate hikes because of the slowing economy and receding inflation. This move is going to affect the interest rates on home loans indirectly, so now might be a good time to consider refinancing in Provo, Utah, or other communities such as Sandy and Orem.
If you have taken a loan in the last 12 months, especially a 30-year fixed-rate mortgage at 4.5% interest or higher, refinancing allows you to snag a new rate as low as 4% or sub-3.50% if you reduce the term to 15 years. Borrowers who secured adjustable-rate mortgages three to five years ago can benefit from a refi before their first rate adjustment kicks in.
This good news does not promise better days for all interested Utahns, but it is worth hearing several offers from different lenders. Do the following thing to put yourself in the best position to negotiate for a lower rate:
1. Do the Math
When it comes to refinancing, the past and the future as just as necessary as the present. Qualifying for a new interest rate 0.50% lower than what you currently have might not automatically save you money in the long run.
If you do not know already, the interest does not represent the overall cost of your loan. The annual percentage rate does, which include the closing costs and the insurance and tax portions of your monthly mortgage payment.
Ideally, you should refinance your mortgage while it is still young to minimize your exposure to interest, for most of your early payment does not toward the principal balance. But if you have already had your loan for many years, and it is the fixed-rate kind, run the numbers first after learning about all of the fees that your prospective lenders impose.
Look for the break-even period, which is the point when you begin saving money moving forward. In your moving plans, refinancing might not be worth the trouble.
2. Review Your Credit Reports
To refinance is to apply for a mortgage, so your credit standing matters. Check your credit reports to look for and fix inaccuracies to see where your current level of creditworthiness. Also, learn about your credit score to see if your credentials are more attractive than those of other borrowers.
Lenders are not keen on offering as many favorable rates as possible, for they can only issue a certain number of loans at a time. So, they are likely to save the lowest ones to the least risky borrowers they will meet.
3. Lock Your Rate
When offered a reasonable rate, lock it in because many lenders might not be willing to wait these days. Floating a mortgage rate when there is a pattern of reductions, but this gamble is not viable at this moment.
4. Have a Strategy
Refinancing does more than just lowering your mortgage interest. You can use it to dump your private mortgage insurance, turn your home equity into cash, or reduce your monthly mortgage payment. Explore the many benefits you can reap from this transaction to structure your loan correctly.
Do not take out a refi just because everyone is doing it. It is advantageous to some people, but it can be detrimental to others. Know which group of borrowers you belong to before resetting the clock of your mortgage.