Are you stuck with high rate debt from credit cards?  Good news… right now is the ideal time to refinance your home loan.

You might be thinking, WHY would I refinance if my current interest rate is so much lower than current mortgage rates?  Let’s just walk through one easy example.  If you have a 300k mortgage with a 3.5% interest rate, but you are holding 85k in high interest debt from credit cards or loans, you are actually not saving money right now.  Some credit cards have rates in the high teens and even in to the 20’s, which means you can be spending thousands just on interest and minimum payments, while your debt doesn’t budge.  By refinancing all of your debt together, your effective interest rate will come down, the amount you pay monthly will come down, and you will have fixed reliable payments over time.  That way you KNOW your debt is being paid off and you have a stable and effective debt management plan.

It’s true that rates are above those historic lows we had a few years ago, but when you compare current rates across decades or generations, rates are actually quite reasonable right now.  And decreasing your interest rate on high interest debt can save you thousands of dollars over the life of a loan.  But you need to act quickly, because treading water struggling to pay down your debt on your own can have consequences over time.

We know how it is, your obligations change. And your obligations are different than they were when you first signed your mortgage agreement.  Your family is growing. You need to ramp up your retirement savings. And before you know it you’ll be paying college tuition.  You need to protect your credit and your cash flow, and the best way to do that is to consolidate your debt.

Regardless of what you need to save money for, we can help you potentially save up to hundreds of dollars a month when you refinance your home loan. Over the life of the loan, many homeowners will save themselves over tens of thousands of dollars by refinancing their loans to clear their high interest debt.

Personal finance and wealth is a marathon, not a sprint. And if you want to reap the benefits of your money later on in life, you can start by refinancing now.  What could you do with that much extra money in your pocket?

If you’ve been diligent about your mortgages and bills, but need a little help, it’s time you got rewarded.

When Should I Refinance?

Interest rates are steady and reasonable.  Homes are more valuable than they’ve been in years. Now is the ideal time to consider refinancing if you have other debt or large purchase needs.

Before you consider getting a loan, you need to ask yourself one question: “What do I want to get out of my refinancing?” These are the most popular reasons to refinance:

• You want to save money on your high interest monthly payments.
• You want to get cash from your home.
• You want to make good use of your equity.
• You want to consolidate your debt.

These are all good reasons to consider refinancing your home loan. The important thing is that you’re clear about why you want to do it. This will help you decide if now is the time, and help evaluate if this is the very ideal option for you.

And when you know what you want out of your refinance, understand why now is the ideal time to consider refinancing.

Is Now the Right Time For You?

There are three times when refinancing makes the most sense:

1. When market interest rates have dropped drastically.

This is the most common time to refinance. Think about 2020 through 2022 as the biggest example of this.  It becomes easy to save money on your monthly payments. Or if you can, continue to pay the same amount and pay your loan off quicker.  Unless you purchased using an adjustable rate mortgage, or bought using a loan that included higher than market rates, you don’t likely fall in this category.

2. Your home is gaining value quickly.

Most people today fall in this group.  Homes are worth more today than they’ve ever been.  When the value of your home is higher than it was when you purchased it, you can take advantage of that increased equity. This can help you make big purchases or pay off other large debt. Many homeowners may choose to use the new equity to handle credit cards, renovations, college or other higher interest debt.

3. You’ve only been in your home for a few years.

When you first own your home, most of your payments go toward interest. When you pass the point of paying mostly principal, it’s probably not a good idea to refinance.  We tend to see people refinancing within the 10 year mark, as they’ve likely undergone significant life changes and getting cash or consolidating can help them.

Refinancing might NOT be right for you. 

But that’s okay. It’s not important that you refinance, it’s important that you get in touch with an honest and qualified home loan professional like us here at Fellowship Home Loans and figure out what is ideal for you.

The Reasons To Refinance

Put your own spin on your home with a remodel project, get cash out and into your pocket, or just start saving some cash from high interest debt payments. Those are the most popular reasons to refinance a home right now.

But they aren’t the only reasons:

• Switching from an adjustable rate mortgage to a fixed rate. Many adjustable rate loans seem appealing to home buyers because their rates can start significantly lower than fixed-rate loans. But this rarely stays so sweet.  The rates of these ARM (adjustable-rate mortgages) tend to rise significantly and quickly later in the loan’s life. It can be very beneficial to refinance to a fixed-rate before this rise happens.
• You need to pay for college tuition. Let’s face it, college costs are a significant burden.   If you’re a parent who wants the best for your children, this may come as a big financial burden. Full-ride scholarships are harder and harder to come by. If you need to pay for a child’s education, and you don’t want to saddle them with student loan debt that will stick with them through their critical young adult years, refinancing to tap into your equity is a great option.

The Right Refinancing Option for You

There are a lot of refinancing options. And that can be pretty overwhelming if you aren’t a financial guru.

The most important aspect of refinancing is that you find the option that is right for you. Your needs are specific to you, and not the same as anyone else.

Your most common refinancing options broadly include:

• Fixed Rate Mortgage Refinancing. This is the most common option for refinancing, and with good reason. A fixed rate mortgage never changes, and you won’t get blindsided with the rapidly increasing rates of an adjustable rate mortgage. This is probably the option that’s ideal for you because of today’s historic low rates. Rates might not be this low again in your loan’s lifetime.
• FHA Cash Out Refinancing. FHA refinancing allows you to go to a higher loan-to-value than a conventional refinance and is good for: consolidating debt, cash out for home improvements, shortening your term, or consolidating a first and second mortgage together
• FHA Streamline Refinancing. This is the quickest and most painless way to reduce your interest rate. If you don’t want to waste your time with mountains of paperwork, this is probably your ideal choice.
• Conventional Refinancing. This is similar to the FHA refinancing. It’s a common way to save money on your monthly payments. The question is which one is better for you.

Refinancing can be scary. It’s hard to understand all the options. But you don’t have to understand them on your own. That’s why we’re here – to help you figure it out. The ideal thing you can do for yourself is contact us and we’ll help you swim through the nuances of the different loan types to figure out which one is right for you.