What to Consider When Refinancing Your Mortgage

by Jenny Deng 04/14/2019

The Mortgage Bankers Association (MBA) refers to mortgage refinancing as a crucial aspect of all mortgages. This is partly because comparatively, low mortgage interest rates have encouraged homeowners to restructure their financial situations using their home equity. Homeowners should base their refinancing decision on their circumstances rather than mortgage interest rates. Here are tips to consider when considering refinancing your mortgage: 

Home Equity

You need to have home equity before you can even consider refinancing your home mortgage. Home values are steadily rising which means that with conventional lenders, you can have enough equity to get a loan. Most lenders will allow a homeowner with at least 20% equity to get credit quickly.

Credit Score 

In recent years, lenders have made the requirement for loan approval stricter. Therefore, some consumers with good credit may not qualify for the lowest interest rates. Typically, the acceptable credit score by most lenders is 760 and above. Borrowers whose credit scores are not up to the satisfactory score may still obtain a new loan but with higher fees or interest rates.

Refinancing Cost

Refinancing costs usually take between three to five percent of the loan amount. Borrowers can look for ways to reduce this cost or incorporate it into the loan. The cost can also be rolled into a new loan if you have enough equity. With some lenders, you are likely to pay an interest rate that is slightly higher to balance the closing cost when you take a loan with them. Make sure that you negotiate and ask several lenders so that you get the best fees for your refinancing loan.

Rates vs. Term 

A borrower needs to have a goal when refinancing to know the exact mortgage product that is most favorable. If all you want is to reduce your monthly payment to the minimum, a loan with a long-term interest rate will be beneficial. If your goal is to pay a reduced interest rate over a short period, you should consider the lowest interest rate in the shortest term. 

Break-Even Point

Before deciding to refinance your mortgage, determine the break-even point. The break-even point is the time at which your monthly savings have covered your refinancing cost. Beyond this point, your monthly savings belong to you. This also means you know how long it will take before your refinancing makes sense if you intend to sell or move from the home in some years.

Mortgage refinancing can be quite confusing, so you need to be sure you completely understand the terms and conditions. Do your research and also speak to a financial planner to give you professional advice.

About the Author
Author

Jenny Deng

I am a passionate Real Estate Realtor,  who epitomizes integrity, energy, hard work, and creative service in every single detail of your real estate transaction. I take a full-service approach to real estate—I provide property preparation, highly effective targeted marketing, coordination, comprehensive follow-up services and more.


I am a long time Bay Area resident, and I have a master degree in computer science. I was an engineer before I became a realtor. I am bi-lingual – fluent in speaking and writing in both English and Chinese
I have worked every aspect of the industry representing sellers, buyers, and investors – I have 100% satisfaction level from my clients, 100% of which return to me for their next real estate decision.  I am also branching into commercial real estate and plan on applying my integrity and passion to my clients in that arena.

Professional Philosophy
Your satisfaction is my goal.  My negotiating skills and penchant for creative marketing helps my clients  get maximum returns on their real estate transactions.
I credit my organizational skills and knowledge of contract details for my ability to ensure timely, smooth transactions. I am believer in keeping my clients informed so they understand what’s happening at every step of the buying and selling process.
Once you make a purchasing or sale decision, I will work relentlessly on your behalf until the deal is closed.  You will receive personalized concierge service from me, and my absolute full commitment.  I won’t leave a single stone unturned, and will not sleep until the day’s work is done.  I will make sure third parties are on the job and that you are getting their priority and your file is on the top of their desk, and we are not falling behind.
While you will feel like I am your personal agent, we will have the resources of Coldwell Banker, a multi-billion dollar company, behind us whenever we need them.

Professional Affiliations
Member of Silicon Valley Association of Realtors
Member of California State Association of Realtors
Member of National Association of Realtors
Rewards of Coldwell Banker’s International Sterling Society