Fixed-rate mortgages and refinancing allow Maryland homeowners to improve their financial situations. However, these strategies will not benefit everyone equally. Homeowners should carefully consider their mortgages and Maryland mortgage rates before making long-term changes that could impact their financial health.
In this article, we have compiled a guide for Maryland homeowners with fixed-rate mortgages who wish to refinance. For homeowners who plan on living in their current home for the foreseeable future, strategic refinancing could provide the funds they need to fund a remodel, pay off their debts, or reinforce their savings.
What is a Fixed-Rate Mortgage?
Fixed-rate mortgages offer interest rates that remain constant for the loan duration, typically 15-30 years. Fixed-rate loans offer predictable monthly payments, which leads to several attractive benefits, including greater financial stability, more transparent long-term budgeting, and financial protection against rising interest rates and other market downturns.
Maryland mortgage rates are subject to fluctuating urban and suburban markets. Many prefer the financial stability and transparency of fixed-rate mortgages to adjustable-rate mortgages (ARMs). For these loans, interest rates vary based on market conditions and predetermined rate changes after an initial adjustment period.
How Does the Market Influence Mortgage Prices?
When considering refinancing, homeowners should account for how the market impacts mortgage prices by addressing issues such as:
- Property Taxes, which can vary significantly depending on the county
- Federal Reserve Trends, which can impact the economic health of the housing market and change borrowing costs for new and existing homeowners
- Home Value Appreciation and Depreciation, which will impact the homeowner’s equity and raise or lower the value of their investment, depending on the trends
Against these changes, some predictable and others fluctuating over time, many homeowners refinance their mortgages to future-proof their finances against a volatile market.
When Should Homeowners Consider Refinancing?
Refinancing a mortgage entails replacing the current mortgage terms with new ones to achieve a more stable financial position. However, timing is essential when refinancing since the market conditions at the time the loan is signed and the forecasts for future market performance will impact its terms. In most cases, homeowners refinance to improve their financial standings. Still, personal finances are not the only factors they should consider.
Have interest rates dropped?
If interest rates have lowered since the original loan was established, homeowners can save thousands of dollars over time by refinancing. However, if Maryland mortgage rates have increased, the original loan may be more advantageous. Many homeowners mistakenly believe that refinancing will always save them money without accounting for how market changes relative to the original loan will change its impact.
Can the loan term be shortened?
Many homeowners sign 20-year- or 30-year mortgages according to their financial situations at the original loan time. However, many who improve their finances over time should know that refinancing a loan with a shorter lifespan can save them thousands of dollars. By shortening the terms to 15 years, homeowners can save a decade of interest payments, helping them build equity faster.
Does the home have usable equity?
Usable equity is calculated by comparing the home’s value to the debt still owed on it. Many homeowners have more usable equity than they realize due to rising housing prices and other factors. Refinancing can allow homeowners to tap into this equity to consolidate their debts, pay for renovations, or renegotiate their loan terms.
Are refinancing costs worth it?
To refinance a loan, homeowners must pay closing costs and additional fees to their mortgage lender. These fees prevent people from renegotiating loans too frequently. For homeowners, these costs should be considered when determining the value of refinancing. In many cases, the benefits of refinancing will not recoup the costs.
Would an adjustable rate be preferable?
In addition to refinancing to a more favorable fixed-rate loan, homeowners can refinance their mortgages to adjustable-rate loans to take advantage of a favorable market forecast. ARMs offer potential advantages at the cost of variability. In contrast, fixed-rate loans provide stability at the expense of retaining the original loan’s terms. Depending on market conditions and the homeowner’s finances, this could be an advantageous reason to refinance.
Consult Woodsboro Bank to Refinance Fixed-Rate Mortgages in Maryland
At Woodsboro Bank, our financial consultants help homeowners in Maryland determine whether refinancing is advantageous in their situation. In some cases, refinancing a fixed-rate mortgage or changing to an adjustable-rate mortgage can save homeowners thousands of dollars over the loan’s term. In other cases, market predictions, closing costs, and the homeowner’s financial situation may contradict those advantages.
Contact our team today to learn how refinancing can impact your financial situation in Maryland. Our professionals can examine your situation and help you learn everything you need to know, including how Maryland mortgage rates, market forecasts, and your home’s equity will impact the value of your refinanced loan.