Are you stuck with high mortgage rates after the 2007 housing crisis? Good news… right now is the best time to refinance your home loan.
Rates are at a historic low, and a one point decrease in your interest rate can save you thousands of dollars over the life of a loan. But you need to act quickly, because all signs indicate that rates will start rising again soon.
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.
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 $50,000 by refinancing their loans.
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, it’s time you got rewarded.
When Should I Refinance?
Interest rates have dropped. Homes are more valuable than they’ve been in years. Now is the best time to consider refinancing.
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 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 best option for you.
And when you know what you want out of your refinancing, understand why now is the best time to consider refinancing.
After the market crash in 2008, it became hard to get a mortgage. The bank requirements for refinancing became more stringent. It doesn’t matter who you were and whether you owned a home or not, you felt the effects of the crash in some way.
The market is slowly being repaired, though. And your home is worth more now than it was eight years ago. And eight years ago, many would-be refinancers were denied from the bank, but not anymore. The more valuable your home, the easier it is to get a loan.
Is Now the Right Time For You?
There are three times when refinancing makes the most sense:
1. Market interest rates have dropped drastically.
This is the most common time to refinance. 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. Mortgage rates are likely to go up, and so it’s important to remember that now is one of the best times to refinance.
2. Your home is gaining value quickly.
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 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.
That point is really important!
Refinancing may not be the best solution 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 expert and figure out what is best for you.
The Reasons To Refinance (That You’re Unsure About)
Put your own spin on your home with a remodel project. Or, just start saving some cash. Those are some of the most popular reasons to refinance a home.
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 aren’t going to go down. In fact, in 10 years the cost of going to college for one year raised an average of 34% in the United States. If you’re a parent who wants the best for your children, this may come as a big financial burden. And, full-ride scholarships are harder and harder to come by. If you need to pay for a child’s education, 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 expert.
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 financing options broadly include:
- Adjustable Rate Mortgage Refinancing (ARM). This option is not for everyone. In fact, in many situations, there are serious disadvantages to an ARM. The biggest problem is that these loans start out with low rates but can increase quickly after a few years. But there’s a time and place for everything, including ARMs. Are you planning on moving soon or refinancing again? Then this could be the best way to take advantage of low rates.
- 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 best 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 best choice.
- HARP Refinancing. This can be a great option if you’ve been denied loans in the past, but this opportunity expires soon. The HARP program was made to help homeowners who’ve seen their house lose value. That can be painful, but it doesn’t have to be devastating. If you’ve made an honest effort to pay your bills but are going through some hard times, this program can save you a lot of stress.
- 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 best thing you can do for yourself is contact an honest lending agent that can help you swim through the nuances of the different loan types and figure out which one is right for you.