Many Colorado residents are in a unique position for refinancing. Median home values in the centennial state have climbed dramatically – by over $100,000 – since 2012. Depending on your initial loan terms, and property value, you might have a significant amount of equity in your home. This is a perfect compliment to the current mortgage rates in Colorado (CO).
Current refinance mortgage rates in Colorado are comparable to national rates, which are low based on the historic averages. Renegotiating from a higher interest rate to the lowest possible payment can be a sound financial decision for many reasons.
Reasons to consider a refinance
There are a number of strategic reasons for a homeowner to refinance. Here are a few that might resonate with you:
- A homeowner’s credit score has improved since they secured their initial loan. This means they may be eligible for better loan terms.
- It is also common to consider refinancing if a homeowner needs extra cash to fund a special circumstance like college expenses, a special trip, a house renovation, or unexpected medical bills.
- The value of someone’s home has increased since they initially purchased, and interest rates are lower than original loan terms. This is a perfect combination for saving money or even using the cash-out option.
- Some homeowners use refinancing as a way to consolidate debt.
- Locking in a better mortgage rate may save money in the long-term, especially if the original rate was much higher, which is the case for many homeowners in Colorado who secured loans before 2008.
- A homeowner may want to change the conditions of the original mortgage by lengthening or shortening the number of years in the loan agreement or by changing from a fixed to an ARM or hybrid rate.
Homeowners in Colorado, may have more equity in their home than they realize, making refinancing a smart financial decision. (Photo/Colorado.gov)
Three popular refinance products are fixed and adjustable rate and government-backed loans.
Fixed rate mortgage: With a fixed rate mortgage you will know exactly what your monthly mortgage obligations will look like over the course of your loan. Most homeowners refinance with a fixed rate if they think interest rates could rise in the next few years. It’s also wise to consider a fixed rate mortgage if you plan to stay in your home for a long time. Fixed rates offer stability, which is important to many homeowners. Colorado offers fixed rate refinances for 5, 10, 15, 20, and 30 years.
Adjustable rate mortgage: Adjustable rate refinances offer a bit less stability than fixed rate mortgages, but can offer lower rates if purchased strategically. After an initial fixed period of time, your interest rate may begin to change periodically. As your interest chances, so will your monthly payment. Changes to your rates will be based on market value. It’s wise to consider an adjustable rate mortgage if you are nearing the end of your current loan, or anticipate interest rates to decrease in the near future. Hybrid-adjustable rate mortgages can be for 3/1, 7/1, and 10/1 year periods.
FHA refinance loans: These government-backed loans offer flexible qualification guidelines to homeowners who may have less than stellar credit, but still want to refinance. FHA offers a cash-out refinance and streamline refinance product. The cash-out refinance option is best for homeowners whose property has increased in value since the home was purchased. A streamline refinance is an option for those who would like to reduce the interest rate on their current mortgage. This type of refinance option oftentimes comes without needing an appraisal. The FHA Streamline refinance program does not require an appraisal and tends to be a simple and speedy process for those who are eligible.
VA refinance loans: Similar to FHA loans, VA loans tend to offer flexible qualification guidelines. This means creditworthiness and debt to income standards might be less strict than with conventional refinance loans. VA loans also could offer lower interest rates, especially if you’re able to secure a loan through a military credit union like USAA. It is possible to find FHA and VA fixed-rate loans with 15 and 30 year refinance rates.
Closing Costs and Points
Closing costs vary depending upon the size of the refinanced mortgage, the number of services for which a fee is charged, and the points included in the transaction. They may be as much as 3 percent of the total amount borrowed, which can, in some cases, be rolled into the loan itself.
Each point represents 1 percent of the total mortgage refinance amount. By paying more points, the interest rates can be lower. Some lenders advertise refinance mortgage rates in Colorado with no cost closings. However, it is possible that this money is simply recouped through higher interest rates. It is important for the homeowner to know exactly what a refinance mortgage will cost in total to be able to choose among lenders.
The refinance process in Colorado
- Review and compare several published lender rates with a grain of salt. Many lenders advertise their best rates, which you may or may not be qualified.
- Calculate your payment and review the amortization table.
- Calculate your break-even point. Divide the amount of money you spent on closing costs, but the amount of money you will save on your new mortgage. The result is the amount of months it will take you to pay off your refinance.
- Choose suitable lenders or brokers which may be banks or brokerage companies.
- Submit the loan application and expect quotes.
Final thoughts for Colorado refinance options
Always use a mortgage calculator. This is the best way to truly compare your current financial situation with new opportunities. It’s important to compare loan terms, as well as overall costs for closing a refinance loan.
In order to find the best refinance rates, it is always important to check with multiple competitive lenders for the best rates and provisions. In some circumstances, a poor credit rating and new loan terms could actually drive a monthly payment higher than it was previously.
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