The changing world economy and frequent changes by the Federal Reserve have resulted to ebbs and flow in the value of homes around San Diego. To protect their homes from the fluctuating rates, most homeowners around the city have decided to refinance their mortgages.
Refinancing in San Diego is a smart move. It helps homeowners benefit from current interest rates while creating some money to clear other debts. Homes that have accumulated equity after a number of years stand the best chance of attracting higher refinance rates. However, this does not mean new homeowners cannot access the facility. Everybody who has been remitting payments for a house for a period of two years can refinance the loan in San Diego.
The current landscape on San Diego housing
In 2012, the median housing value in San Diego dropped to an unprecedented $368,000. Over the last few years, the housing market in San Diego has picked back up. Zillow estimates median housing values to rise to around $564,000 in 2018. San Diego refinance rates are also lower than they were in 2012. If your home is currently worth more than your original purchase price, and if interest rates are lower than the ones you secured for your initial loan, you could be in a great position to refinance.
Refinancing options in San Diego
As you’re shopping around for the best program for you refinance, you’ll come across these refinance products:
- Fixed rate
- Adjustable rate
The primary products you’ll find from many banks and mortgage companies are the 15-year and 30-year fixed rate refinance options. Fixed rate mortgages are desirable for homeowners who like certainty in their budgeting. Fixed rate mortgages ensure a homeowner will know exactly how much he or she needs to budget to cover their monthly mortgage.
The 15-year rate is a good option as you become debt free a bit faster. It also enables you to own your home more quickly. Interest on this mortgage can be lower depending on other factors that vary from bank to bank. The downside of this mortgage is that the monthly payments are a bit high.
The 30-year fixed rate mortgage is the best choice for most ordinary homeowners in San Diego. This is because the monthly payments are very low and are spread over a long time. This makes payment easy. One thing to consider with 30-year fixed rate mortgages is how they will affect the cost of your loan over its lifetime. If a 30-year loan extends your terms many years, you may wind up paying more in interest than with your original loan terms. Make sure to use a mortgage calculator to see the true cost of your refinance.
Adjustable rate mortgages typically come in 3/1, 5/1 or 7/1 terms which means that, for a period of time, the loan’s interest will stay fixed. The loan then becomes subject to market rates. If market rates increase, so will your interest and monthly payment. ARMs are less certain than fixed rates but are a smart product to consider if you are nearing the end of your current loan, or you anticipate interest rates to decline in the future.
Government-backed mortgages like the VA and FHA options tend to have more relaxed qualifying terms. The debt to income ratio and credit score eligibility are usually less strict than with conventional loans.
San Diego refinance qualifications
There are a number of variables that determine the interest rate on your San Diego refinance. The main consideration is credit performance. All lenders carefully scrutinize your past credit record when determining the interest rate they will charge on your mortgage. A poor credit record will, without doubt, attract a higher interest rate for your loan.
The other factor is the point scheme. Refinance mortgage rates in San Diego are based on a point scheme that is pre-set. The rule is that the more points you earn the less the interest rate on your mortgage. Points are earned depending on the amount you pay as down payment at the closure of the agreement. The higher the amount you pay, the more points you earn resulting to reduced interest.
Finding the right lender
The first place you might start your research is at a credit union or community banks. Often these banks have a not-for-profit structure and may be able to often promotions that larger regional banks cannot match.
If you qualify for a special government-backed loan, like a VA loan, shop military specific lenders that may have unusual promotions or qualifying benefits. USAA, for instance, touts having some of the lowest rates on VA loans available.
If you’re already a member at a regional bank, see what promotions they offer for existing customers. Wells Fargo, for instance, offers a streamlined process to members so they can avoid some of the paperwork associated with refinancing.
It’s also wise to consider a mortgage broker. Brokers have many connections in the lending world, and can easily help match borrowers and lenders. Brokers also have the expertise to explain which refi package might work the best in individual circumstances.
Final refinancing tips:
Do your homework before jumping into the refinancing process. You can easily access a mortgage calculator that can help you determine your financial situation, and how useful a refi would be for you. Mortgage calculators allow homeowners to compare their current loan terms to current market rates. You can also add ancillary fees like closing costs to the equation to identify your breakeven point, and total life of loan costs. Sometimes extending your loan for a lower monthly payment will actually increase your total cost. Be wise with your decision to ensure you’re setting yourself up for success.