We’re a few months from 2017 and refinancing may still be a good idea for some homeowners. The Brexit vote in June pushed down mortgage rates to historic lows, but now they seem to be ticking back up.
The good news is refinance rates are only marginally higher than they were a few years ago when they reached record lows. Taking out at least 1% from your current mortgage rate can make a significant difference.
For example, you have a 30-year fixed rate loan with a 5.6% interest rate. If you refinance at current interest rates, your monthly payment can go down by $120 for every $100,000 you borrow.
Mortgage Ogden says refinancing your home loan offers the best deal if you can find the lowest interest rate. Check out your options:
Conventional loan
The more equity you have, the easier it is to refinance. If you have a decent credit score and 20% equity on your home, you may qualify for a traditional mortgage. It is also the most affordable option for homeowners. Borrowers with a FICO credit score of 738 and 33% equity were approved for a refinance with a conventional loan.
FHA loan
A Federal Housing Administration (FHA) loan refinance is more for low to moderate-income borrowers with little to no equity and a lower credit score. The FHA doesn’t offer the loans but insures the loans and guarantees that the lenders will be repaid. With the government’s backing, mortgage lenders can offer loans at super low rates that they wouldn’t offer with conventional loans. On average, homeowners who have been approved for FHA refinance had 21% equity and FICO credit score of 654.
VA loan
VA loans are considered the best mortgage programs around, helping millions of Veterans refinance or purchase a home. It’s backed by the Department of Veteran Affairs, which means less risk for lenders and fewer requirements for borrowers. You can have less home equity, lower credit score, and a high debt-to-income ratio. Lenders have approved an average home equity of 12% and a FICO credit score of 706.
Whichever type you choose or believe you qualify for, the process takes patience. If you’re really serious about refinancing, it’s a great time to be looking at options.