You may be wondering why I’m bringing up refinances now when all we have seen are high interest rates. If you own a home and you closed in the last couple of years, you should really start getting prepared. Rates may drop in the next six months and you should know at what interest rate it would make sense for you to refinance.
A refinance, “refi” for short, is when you pay off your current mortgage and commit to a new loan. There are many reasons people refinance, but the three we see most often are: (a) to cash out the equity in the home, (b) to take someone off of the loan or (c) to borrow money at a lower interest rate. When your home’s value rises, whether it is the market or just the sheer length of time you have owned it, you may be able to refinance and get a lump sum payment from your new loan. People will do this to either pay for renovations or pay for some other large expense unrelated to the home that they may have.
Another time refinancing is advantageous, is when two people who owned a home together with a mortgage get divorced. Often, one person wants to remain in the home but they do not want to stay on the loan with their ex. A refinance is how you would take one borrower off of a loan. You pay the original loan off, open a new loan under your sole name and viola, problem solved!
The third reason we often see people refinancing is an interest rate drop. We saw rates plummet during COVID. Lenders were inundated with calls wanting to refinance. Several of the large banks took their customer service number off of their websites because they could not handle the call volume. Why is this relevant now? With the upcoming election season, we may see a dip in the rates. Two weeks ago, there was one day the rates dropped the lowest they had been in years and I’ve heard from several loan officers that their phones were ringing off the hook.
No one can predict when it will drop again, some are saying this Fall, others are saying Spring of 2025. Regardless, if you closed on a property that has an interest rate of 6% or higher in the last few years, reach out to your prior realtor or loan officer. They can run numbers for you to see what your house would most likely appraise for, what your closing costs could be, and help you determine when you would want to refinance.
I would highly encourage you to do this legwork now, so that if the rates drop you are prepared to snag that lower rate quickly. Even a small drop could end up saving you a ton of money in the long run. Once you lock in a rate with your lender, engage with Jackson Law to do your refinance closing. Banks may not tell you up front that you need an attorney, but in North Carolina, you will. We frequently do refinance transactions and are ready to help when you get that great rate!
With this knowledge, now you can rest easy!
