Every other month or so, I get an official-looking letter from my mortgage provider encouraging me to refinance. True—mortgage rates are lower now than ever before, and certainly even lower than when we bought our place a little more than two years ago. However, just because rates are low doesn’t mean we want to try to refinance.
Why? Well, for one thing, we’re not sure how long we’ll be in this home. Both of us are open to relocation with our current jobs, for one thing. Another is that we bought this home as a “starter” home. Meaning, it will suit us for the time being with one child on the way… but with an older child and perhaps a sibling, we’ll definitely outgrow it. Why pay the fees and closing costs of refinancing if we’re not going to be here long term?
Another issue is our home value. Despite thinking we were buying at the bottom of the market when we did, that turned out to be not the case. We’ve definitely lost equity in our home since purchase, and in order to refinance you need to have a certain percentage of equity in your house. Even though we put down 20% when we bought, if our equity isn’t that much now, we’re out of luck. We don’t know whether this is the case or not, but we’re not hopeful.
Finally, our rate isn’t that bad. However, we also didn’t get that bad a rate to begin with, since we both had great credit and a decent down payment.
Refinancing can look financially attractive, but it’s also important to consider whether or not it’s the right move for you.