What You Should Know Before Refinancing Your Delaware or Pennsylvania Home
The idea of cutting your monthly mortgage payment down by refinancing your loan may sound intriguing to you as a Delaware or Southeastern Pennsylvania homeowner, but there is much more to consider before diving in. In fact, there are cases in which refinancing does not truly pay off for the homeowner. But don't worry! As your local real estate experts, you can count on the Kat Geralis Home Team to help you make the best decision for your situation.
Below are four factors to consider before making the decision to refinance your mortgage:
Refinancing is not free
Just as you likely paid some closing costs when you purchased your home in Wilmington, Newark and the surrounding areas, you will be required to again with refinancing. Closing costs are typically 2 to 5 percent of your loan amount and will need to be paid up front when you refinance. While your lender may offer a no closing costs refinance, be aware that it may come packaged with a higher interest rate. It's always wise to consider all of your options!
The savings should pay off quickly
When deciding if a refinance is right for you and your Delaware or Pennsylvania home, you need to look at the savings. Refinancing makes the most sense when your interest rate is more than 100 points above the current interest rates. The savings from your refinance should also recoup itself in under two years. For example, if your refinance cost you $2,800 and you end up saving $179 per month, the savings would be recouped in 15 months. It pays to crunch the numbers!
You may be able to cancel PMI
As we've talked about in the past, private mortgage insurance (PMI) is required for buyers that put down less than 20 percent on their new home. However, if you've gained enough equity in your home over the past years, a refinance may mean you're able to cancel your PMI. Just remember the loan balance needs to be 80 percent or less of your home's value.
Refinancing resets your loan
Perhaps one of the most important factors to consider is that a refinance is essentially hitting the reset button on your home loan. If you've had your loan for many years and have reached the point where you're paying down the principal instead of interest, refinancing may not be the best idea as you will likely reverse this dynamic.
Questions about selling your home in Greater Wilmington, Newark, Chester County or Delaware County PA? Do not hesitate to give the Kat Geralis Home Team a call today!
Katina Geralis
Wilmington, DE Real Estate Expert
Keller Williams Realty
Wilmington Real Estate
Wilmington Homes for Sale
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