Is Now a Good Time to Refinance…and Review Your Home Insurance?
July 17, 2020
According to the Wall Street Journal, 30-year mortgage rates just reached their lowest level ever. Yup, you read that right: America’s most popular home loan hit a record-low rate of 2.98 percent this month. Plug that new number into any online mortgage calculator and compare it to the average interest rate from two years ago (3.81 percent).
On a $400,000 mortgage, for example, this one small change adds up to major potential savings—roughly $200 off your monthly loan payment, and more than $70,000 saved over the life of your loan. Got a current rate that’s higher than 3.81? You might be in a position to yield even bigger savings.
Is now a good time to refinance? Maybe…
The answer will be different for every household. It’s important to note that not every borrower will qualify for the record-low rate. And while we are not financial planners, we can advise that if you or your co-borrower has recently lost your job/been furloughed, you might not be in a position to renegotiate mortgage terms. Here are some other reasons to think twice before looking to refinance:
- You have bad credit. (According to Experian, most Americans’ credit scores fall between 600 and 750, with anything above 700 considered “good.”)
- You can’t afford to pay the closing costs (typically 3-6 percent of the total loan amount).
- You don’t have enough equity in your home (less than 20 percent).
- You’re thinking of moving in the next few years.
- You’re already well into your loan’s repayment term (say, 10 or 15 years).
- You already have a decent interest rate (and you can’t improve on it by at least 1-2 percent).
So, for a lot of folks, refinancing isn’t in the cards this year. And that’s okay, too. Because… Whether right now is a good time to refinance or not, you can always think about reviewing your home insurance plan.
Remarketing your home insurance makes sense for just about everyone. Unlike refinancing, asking for comparison quotes on home insurance doesn’t potentially impact your credit score. (Insurance agents request what is known as a “soft pull” of your credit. Lenders do not see this kind of activity.) Additionally, the process is much less intrusive. (You don’t need to supply two months of bank account statements, for example, in order to lock down new insurance rates).
Meanwhile, the upsides can be just as good.
Benefits of Reviewing Your Home Insurance
By shopping your coverage, an agent may be able to find you a lower rate. Sometimes the savings can be as significant as $100 or $200 per month.
Looking at other carriers may allow you to bundle your home and auto insurance, creating the potential for even bigger savings.
Premium rates aside, it’s a good idea to reevaluate your home insurance coverage periodically—making sure you have the right types of coverage and adequate coverage limits. This is especially true if you’ve made any major purchases (like an engagement ring), home upgrades (marble countertops), renovations (a finished basement), or safety improvements (e.g. a water leak detection system). Here’s a list of potential home insurance discounts for minor home improvements.
Materials Needed to Review Your Home Insurance
You might be thinking: this still sounds like a hassle, right? Wrong! In truth, your insurance agent does 99 percent of the work for you. All you need is some basic info about your property (and in most cases, much of this information is available online). Be prepared to supply:
- Year the home was built
- Square footage
- Materials used in structure (type of roof, exterior, etc.)
- Any outdoor structures
- A few other basic details
We know that everyone is searching for good news this summer. And for lots of folks, the opportunity to refinance their home loans will hopefully deliver some financial relief. If you are planning to refinance, contact your insurance agent first. (By the way, we happen to have some of the top insurance agents in Massachusetts on our team.) He or she can help you review your home insurance and get any new coverages in place, so you have time to get your insurance binder to your lender before closing.
If you aren’t able to refinance right now, give us a call about your current coverage anyway: 508.339.2951. We’re happy to help you look for potential discounts while ensuring you and your family are optimally protected.