When is the Right Time to refinance in Arizona? , by Yvonne McFadden.

By Yvonne McFadden

When is the Right Time to Refinance in Arizona?

Before we even delve deeper into whether or not this is the right time to refinance in Arizona, it is important to first understand what refinancing is. Refinancing a mortgage means paying off the existing loan and replacing it with a new type of loan.

There are several reasons why you may decide to refinance your home in Arizona. The four most common reason for many homeowners are;

• To take advantage of the low-interest rates. • To cut the period of repayment. • To convert their loans from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage and vice versa. • To get monies to deal with an emergency, to consolidate debt, or finance a larger purchase.

Before refinancing, it is important to first understand that since refinancing will cost you as a homeowner between 3 and 6 percent of the loan’s principal amount, it will require an appraisal, a title search, and application fees which are all

Speaking of low-interest rates, all through 2020 and 2021, the mortgage interest rates have been so low, which has put so many homeowners on the road to refinancing, especially given the hard economic times. In fact, 17 percent of homeowners with a mortgage on their primary residence refinanced in 2020, according to a September Nerdwallet Survey conducted online by The Harris Poll among 1,413 U.S. homeowners. The survey also found out that nearly one-third of homeowners (31 percent) with a mortgage on their primary residence said that they were considering refinancing in the next year, that is 2021.

IS REFINANCING THE RIGHT MOVE IN ARIZONA?

It depends. To know if refinancing is the right thing to do in Arizona, it is important to first determine how long you plan to stay in your home. In addition, it is important that you also figure out how refinancing might affect your financial goals and also how it may impact your credit scores. All these are the factors that rope in and should guide you on your decision of whether to refinance or not.

One of the best reasons why most homeowners decide to refinance in Arizona is that they want to take advantage of the low interest rates on existing loans. When it comes to refinancing purely based on interest rates, the rule of the thumb should be that it would be ideal to refinance if you can reduce the interest rate on your loan by at least 2 percent. However, many lenders argue that just 1 percent savings are a good incentive to refinance.

While reducing the interest rates on a mortgage will only help you save money in the longer term, it also increases the rate at which a homeowner builds equity in a home.

Some homeowners in Arizona will refinance their mortgage to shorten the time they take to repay the loan. With the falling of the interest rates, many homeowners view this as an opportunity to refinance their mortgage. While there won’t be any significant changes in so far as their monthly mortgage payments are concerned, the new loan they take up usually comes with a shorter duration, which is a good thing.

Another reason where a refinance will come in handy is where you want to avoid the fluctuation ARMs and while they offer low-interest rates than the FRM, the periodic adjustments can sometimes hurt you resulting in higher than the rate available through the FRM. if you notice that your ARM has been fluctuating higher and higher affecting your monthly payments, it may be a good thing to convert to an FRM and this ultimately eliminates the concerns over future interest rate hikes.

However, it is also important to note that converting to an FRM can put you in a ‘fix.’ consider this, what if the interest rate starts going down? Therefore, before converting, make sure you sit down with your financial advisor who will guide you on what action to take.

My Take on Refinancing

Even though the situation might be different, I would recommend you to refinance in Arizona only when;

1. The current interest rates are at least 1 percent lower than your existing rate. 2. You plan on staying in that housing longer than 5 years. 3. You can actually qualify to get a refinance.

You may think that refinancing is an easy decision but it is not. I have seen people who refinanced only for them to get in a financial massacre. You do not want that for yourself. Therefore, do not jump on the refinance bandwagon for the thrill of it or just others are doing it. Take some time off, talk to your financial advisor or even reach out to me for more information.

ABOUT THE AUTHOR

Yvonne McFadden is a veteran in the real estate industry. Her business has been extensive for over 30 plus years. She serves from all walks of life and recently added a foreign presence by becoming licensed in Dubai. To Speak to Yvonne, follow this link; https://thepowerisnow.com/yvonne-mcfadden-2/

Data Sources:

https://www.moneyunder30.com/what-to-consider-before-refinance-mortgage https://www.investopedia.com/mortgage/refinance/when-and-when-not-to-refinance-mortgage/ https://www.credible.com/blog/mortgages/when-to-refinance-mortgage/