Consumers often find it difficult to determine when it makes the most sense to refinance their home loan, and the amount of interest that must be paid is dependent in part upon the state in which the property is located. After a review of refinance rates in North Carolina (NC), it’s easy to see they remain some of the most competitive in the nation.
In fact, mortgage companies and banks are offering a variety of refinancing options to homeowners that would like to reduce their payments, pay off their balance quicker, or even cash out some of the equity in their home.
Types of refinancing products in North Carolina
Fixed rate mortgages are the most popular, and generally less expensive, option for refinancing. Homeowners know what interest rate they will be locked into for the remainder of the loan, which makes budgeting easier. Homeowners that secured loans pre-2008 may have interest rates that are several points higher than current rates, so refinancing to a new 15, 20 or even 30-year fixed rate could lower your payments, and the overall cost of interest on your loan.
Adjustable rate mortgages are an attractive refinance product because they offer incredibly affordable rates at the beginning of a loan term. After an initial (predetermined) period of time, interest rates will increase or decrease with the market value. If the market forecast shows a decreasing rate, an ARM could be a viable refinance option. Another reason someone might consider an ARM is if they are nearing the end of their initial loan’s life and want to take advantage of low interest rates for a short period of time, or if a homeowner plans to sell their home in a few years. ARMS typically come in 3/1, 5/1, and 7/1 terms.
VA loans are backed by the United States Department of Veterans Affairs. VA funding fees for refinancing typically range from 0 to 3.3 percent of the loan amount. However, this fee may also be financed. VA loans have flexible qualifying terms by way of credit score and income to debt ratios compared to conventional loans. And, VA loans allow veterans to qualify for loan amounts larger than traditional Fannie Mae loans.
Similar to VA loans, FHA loans offer attractive interest rates and with less stringent qualification requirements. One downside is that there may be more fees associated with an FHA loan, which can make them more expensive over their lifetime than a conventional loan. Homeowners who have an FHA purchase mortgage might be eligible for a streamline product which minimizes the amount of paperwork required to complete a refinance – including the exclusion of an appraisal. Refinancing an FHA loan will often require that a borrower keeps the same or reduce the repayment terms.
Refinance rates in North Carolina, and nationally, are at a historic low. It might be the right time for you to consider your options. (Photo/Wikipedia)
Length of loan repayment
Lenders have a variety of terms available for a consumer to choose from, so it’s possible to design a loan to meet any specific needs that a homeowner may have. With the low refinance mortgage rates in North Carolina, a prospective borrower may find that they are able to transform their existing 30-year loan into a 15-year term with similar payments. 30-year finance rates are perhaps the most commonly requested, but 10-year and 20- year mortgage terms exist as well. The longer the loan term, the more years you are adding on to the life of your loan. Sometimes the temptation of lower monthly payments can offset your financial goals of paying less over the course of your loan. Double check your math. Use a mortgage calculator to see what adjusted terms mean for you in the short term and the long term.
Closing costs and associated fees with a North Carolina refinance
Banks and mortgage companies often have a schedule of fees that will be assessed during the refinancing process. An appraisal of the home’s value will most likely be required, but the actual cost will depend on how extensive the lender requests the valuation to be. Attorney costs or title company fees must also be factored into the equation when determining what a refinance will cost.
Closing costs can really add up. It’s important for homeowners to calculate the true cost of their refinance, including the ancillary fees they’ll incur as a part of the refinance process. The best way to determine how long you’ll be paying for your refinance, and at what point you’ll truly reap the benefits of your decision, is by calculating your break-even point. To figure a break-even point take the total cost of your refinance and divide it by the monthly savings you’ll enjoy from the refinance. The sum of this equation will total the amount of months you’ll spend paying off your refinance, or when you’ll reach your break-even point.
Some lenders offer a no cost closing option in which consumers will pay a slightly higher interest rate in exchange for not paying any fees. Depending on the length of time that the borrower is planning on staying in their home, a no cost option could make the most sense by helping avoid fees and related expenses.
When refinancing makes sense
Prospective borrowers looking to simply save money on their existing loan without drawing out extra cash need to analyze their current mortgage. Consumers should review their refinancing options based on both monthly payment and the total cost of the new loan. For individuals looking to remain in their current home for years to come, refinancing with the lowest interest rates available could save thousands of dollars annually.
If you need help assessing if a refinance is the right decision for you, consider working with a mortgage broker. Brokers are a great resource for determining what loan terms will benefit you, and matching you to a lender that fits your criteria.
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