Ready to Try Refinancing Your Mortgage This Year?
A good number of homeowners wanting to refinance their mortgages in 2022 found themselves sidelined from making their refi decision because interest rates rose much quicker than anyone expected last year. But now that 2022 is in the rear-view mirror, will 2023 hold more promise for those looking to save money on their monthly mortgage payments?
Here’s what you need to know about refinancing a mortgage in 2023.
Rates Won’t Really Drop Until Inflation Gets Under Control
The rising rates in 2022 were a direct result of inflation that at one point nearly went out of control. But while inflation has eased some, it’s still not where it needs to be for the Federal Reserve to feel confident about lowering the interest rate. The good news is that the rates dropped a little at the start of 2023, but any sizeable drop will most likely have to wait until the economy gets healthier and inflation is brought under control. Will that happen in 2023? The answer is anyone’s guess.
Who Can Save Money By Refinancing in 2023?
When the country was at the height of the Covid pandemic in 2020/2021, the interest rates fell to historic lows. Those who were lucky enough to refinance a mortgage or purchase a new home at that time secured some of the lowest interest rates on record. So, these homeowners will not want to be refinancing their loans in 2023 because they will wind up paying more for their homes.
But, if you bought your home in 2006, then refinancing your loan at today’s interest rates should provide you with a substantial savings every month. If your credit has improved since you closed on your original loan, then you can take advantage of some serious savings.
What to Do Today if You Want to Refinance in 2023
The real estate market is nothing if not volatile. With interest rates always in flux, every little change in either direction causes ripple effects that impact every facet of the lending practice. So, if interest rates aren’t yet where you want them to be for your refinance, but you believe that they will get there at some point in 2023, then you don’t want to wait to start planning for your refinance.
Start now by paying as much of your debt down, so your credit score as high as it can be, and your DTI can be as low as possible. Start gathering all the documents you are going to need to submit to your lender. Compare lenders in your area by reading online reviews and customer testimonials. Avoid opening any new lines of credit.
If you are thinking about refinancing for any other reason than to save money, take the time to really consider your reasons, so you can be confident that you’re making the right decision to refinance.
You should also think about how long you are planning on staying in your home after you refinance. Far too many homeowners make the decision to refinance and then wind up moving before they reach their break-even point. Remember, you will need to pay closing costs on your refinance, so you need to have the money to do this, or if you roll the fees into your loan, then you need to make sure that you stay in the home long enough for your monthly savings to reach the amount of your closing costs or you will lose money with your refinance.
