Tuesday, November 1, 2011

How to Determine if Refinancing Your Evanston Home is Right for You

Whether you’ve been considering selling your Evanston home in the near future, or are interested in cashing in on the currently low interest rates; you may be considering refinancing your Evanston home.
In working in the real estate market as Evanston Real Estate agents, we often have people ask us about refinancing.  While there can be great advantages, such as lowering your monthly mortgage payments, it’s also important to think through the decision to refinance.  Here are five main factors in determining if refinancing is right for you.
1. Interest rates- Refinancing right now is great for homeowners whose current rates are above 5.5% and are hoping to save on their monthly mortgage costs. For an Evanston home; you could potentially save a percentage point or more on an outstanding mortgage.
2. Credit score and income- Most banks in today’s market will require you to have a minimum credit score of 620 in order to refinance. You will also need to prove that your household finances have been stable. If unemployment or other issues have come up that have decreased your finances significantly; you’ll find it hard to refinance.
3. Costs- Refinancing your home will cost you typically 2% of the new loan amount. This includes application, appraisal and inspection fees. Included within refinancing costs is the new escrow account you’ll need to fund. The lender will set up this account for home-insurance and property-tax payments from which they’ll draw annually. Want to avoid this fee? Use the same lender you used for your initial mortgage. Their only costs are limited to issuing new paperwork, so they’re able to keep costs low and can oftentimes speed up the process. Another option is a good faith estimate. Your Evanston Real Estate agent can help you determine which option would work best for your home.
4. Adjustable-rate mortgages- Determining whether you’d like to go with an adjustable-rate mortgage or a fixed-rate mortgage can be tricky. An ARM can be a good choice for today’s market as you’ll cash in on the current lower rates, but can be unstable in the long run. However, a fixed-rate mortgage ensures that your rates will remain stable and won’t rise if the market changes.
5. Greater pricing disparity- Based on your current credit score, the rates offered for refinancing can vary greatly. Lenders will look at Illinois’ average loan-to-value ratio and the percentage of homes with negative equity. The higher the percentage of these homes, the higher the rate a borrower will most likely be offered.
As always, as the Thomas Team, we’re here to help you in any way we can!  If you’d like to discuss how refinancing could work for you or if you’re interested in selling or buying a home in Evanston, let us know!
We’d enjoy the opportunity to work with you and help you navigate the Evanston Real Estate market!

The Thomas Team
Chicago's #1 Real Estate Brokerage

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