Important Message

Community Bank of Louisiana is committed to providing you with the greatest service and technology that the banking industry can offer. We have begun our upgrades and the online banking system will be down until Monday, November 4. Read more about how we are making improvements. »

A couple stands in front of a lake and mountain scenery. They are smiling and holding each other

4 Things You Need to Do to Get Ready for Refinancing

After record-low interest rates on home loans in 2020, the industry has continued to see rates climb higher and higher – with the national average nearing 8% as of October 2023. While these rates are causing difficulties for some to afford a new home, others have been able to make the transition to homeownership albeit with a monthly payment that’s a little bit higher than they’d like. The good news is that, eventually, rates will regulate – and homeowners can take preemptive steps now to be ready to capitalize on those lower rates through refinancing. You should never take on a payment that’s uncomfortable for your current financial situation, but as long as it’s within your budget you shouldn’t let the currently-high interest rates keep you from a dream home purchase. Especially with the potential of a refinance in your future.

But First, What is Refinancing?

In short, a refinance is a revision of the terms of an existing credit agreement. For example, if you locked in a mortgage at a 7.5% interest rate, but rates begin to drop, you could refinance that loan to something more favorable that will lower your monthly payment.

It’s important to take into account all of the variables that come with a refinance. Let’s take a look at what you need to know to get ready for a potential refinance in your future:

  1. Check your Equity – The more equity you have in your home, the better rates you’ll be able get when you go to refinance. You’ll see decreases in rates hitting a ceiling once you’ve got 20% equity in your home.
  2. Check Your Credit – Your credit score plays a big role in the rates you’ll be able to get. If yours isn’t where you’d like it to be, take steps to improve it now so that it will be in tip-top shape when you’re ready for refinancing.
  3. Check Your Debt-to-Income Ratio – Much like when you first locked in your mortgage, your debt-to-income ratio is a factor when considering your rates. If you have any outstanding debt, such as auto or student loans, consider making more advanced payments to lower your DTI in advance of refinancing.
  4. Check Your Math – The cost for refinancing typically ranges from 3-6% of the loan amount. It’s important to compare your monthly savings to the cost of the refinance itself. For example, if you’re lowering your payment by $100 per month but your closing costs are $6,000, you won’t break even for 5 years – which in some cases may be longer than you’d be planning on staying in your home.

Refinancing is all about timing. As a homeowner, the best thing you can do is get everything in order so that when the time is right for you, you’ll be perfectly-positioned to capitalize.

Talk to one of our local loan officers to find out if refinancing is right for you and your family.

Third Party Website Disclosure

You are leaving Community Bank of Louisiana's Web site and linking to a third party site. Please be advised that you will then link to a Web site hosted by another party, where you will no longer be subject to, or under the protection of, the privacy and security policies of Community Bank of Louisiana. We recommend that you review and evaluate the privacy and security policies of the site that you are entering. Community Bank of Louisiana assumes no liability for the content, information, security, policies or transactions provided by these other sites.

Continue