Is It Better To Buy A New Home or Refinance?
Owning a home continues to be one of the best ways that someone can build long-term wealth. When you do own a home, it is natural to think about whether you will want to stay in your home for an extended period of time. With mortgage interest rates so incredibly low today, it could be a good opportunity to purchase a new home. At the same time, it could also be a good time to refinance your mortgage. There are several factors to take into consideration when trying to determine if you should purchase a new home or refinance your existing property.
Is a Move Necessary
One important factor to consider when you are deciding whether to refinance or buy a new property is if a move is necessary. If you are happy in your existing home, have plenty of space, and do not want to move to a new community, it could make sense to stay in your existing property while refinancing a home. However, there are plenty of situations when buying a home could make sense instead. If you need more space, want to move to a new city, or are looking to downsize, you should consider buying a home instead of refinancing your mortgage.
Costs Associated with Options
While mortgage interest rates are incredibly low and you should try to take advantage of them, you should consider the costs of both options whether you are buying or refinancing a home. If you want to sell and buy a new property, you are going to incur a lot of costs associated with paying for closing costs, hiring movers, and even closing your mortgage. Even if you are going to refinance your existing loan, you are still going to have expenses associated with your refinance including paying for a new appraisal or paying points and closing costs.
Another option that you should consider is to get a cash-out to refinance. Most mortgage lenders today will offer you the opportunity to refinance your mortgage and take equity out of your home as long as your loan remains below 80% of your appraised value. A cash-out refinance can make a lot of sense as it will give you the opportunity to borrow money for the long term at a very low-interest rate. You can then use these cash-out proceeds to complete home renovations, pay off higher-interest rate debt, or even invest in the stock market. While your loan balance may go up, the lower interest rates could still result in a lower monthly payment.
Difference in Interest Rates
Another factor to think about when you are going to purchase or refinance is whether there is a difference in interest rates. While interest rates can fluctuate on a daily basis, they are often more affordable when you are looking to purchase a new home versus completing a refinance. This could make a purchase a more affordable option in the long-term. However, the interest rates can also fluctuate based on whether or not you are going to take out a jumbo mortgage. If a new home purchase pushes your mortgage amount to a point where you will have a jumbo loan, the interest rate could go up a lot. The jumbo mortgage level can vary based on where you live, so it is important to know if your loan would be considered jumbo.
Mortgage interest rates today are extremely low and something that all property owners should try to take advantage of. If you would like to take advantage of these low mortgage rates, you could do so by either refinancing your current mortgage or by selling your home and buying a new one with a low-interest mortgage. There are several factors that should be taken into consideration when you are trying to decide between purchasing or refinancing a home.