(WTNH) — Home mortgage interest rates recently hit their lowest level in three years due to Coronavirus fears. Dana Clark, Vice President of Lending at nonprofit Nutmeg State Financial Credit Union breaks down the pros and cons of refinancing.
What factors should current homeowners take into account before refinancing?
· Whether or not a mortgage refinance is right for you depends more on individual circumstances than this week’s mortgage interest rates.
· Homeowners with at least 20% equity will have an easier time qualifying for a new loan.
· Know your credit score.
· Know your debt-to-income ratio.
· Calculate the break-even point — the time it will take for the mortgage refinance to pay for itself. For example if your new mortgage saves $100 per month and you paid $3,000 in closing costs it will take 30 months to break even. Depending on the length of the loan, sometimes you can avoid closing costs.
· Another thing to remember is that your existing lender may have a pre-payment penalty.