So you purchased a PA new home a year ago and celebrated when you locked into that ridiculously low interest rate of 4.875%, right? For those of you who may have purchased in the last few years, the last thing on your minds is today’s mortgage interest rate. After all, you locked in lower than you ever thought possible and interest rates have been hovering at historic lows for years.
Well, look again. Even if you have only lived in your home for a year, you may be shocked at how low the interest rates are now. Today’s going rate on Wells Fargo for a 30-Year fixed? 4.00% – and that is with no points. 15-Year loans and ARMs are undoubtedly lower with 5/1 ARMs coming in at an incredible 2.375% today.
And for those of you who have not yet purchased a new home, it goes without saying that a near 1% decrease in interest rates is equivalent to paying tens of thousands of dollars less for the same home than a year ago – amazing!
So, when is it time to refinance? Well, some say when the interest rate is 1% lower than your current rate. The truth is, though, that there is no one-size-fits-all answer to the question. However, it may be worth at least a phone call to your lender to see how much money you may save and when the payoff will occur. Some tips to remember:
- How long will you live in the home? If you plan to make this home for life, than a refinance will almost always make more sense unless you are close to your pay-off date. Additionally, if you are only planning to live in the home another 5 years or so, now may be the time to switch out of a fixed and into a 10-1 Arm. It will give you some degree of flexibility and peace of mind with a fixed interest rate for 10 years, and the savings can be huge. Picture going from 4.875% or more all the way down to 2.875%!
- How much is your mortgage? The larger the mortgage of your Pennsylvania new homes, the more money you will save with a decreased interest rate, which helps offset the refinancing fees. For example, a $300,000 loan at 4.875% that drops to 4.0% will knock $156 off your monthly payment and save you nearly $2,000 a year. The same interest rate drop on $100,000, on the other hand, only saves $52 a month, making it more difficult to justify the refinancing fees.
- What is your credit like? If you have recently taken a major hit on your credit score, now is probably not the time to think about refinancing. If, however, you have been working hard to improve your credit and have seen a significant increase in your score, it could be the perfect time to cash in on some savings.
If you have any refinancing questions, feel free to contact us. We’d love to hear from you and are always here to help! For more tips and information, visit the S&A Homes website.