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If your rates are below the current market rate and you thought you couldn’t refinance – think again. There are several reasons to refinance. In some cases, even if you get rates higher than your current rates you could still end up saving a ton of cash. Stay with me and you will find out how.
Below are 7 reasons why you should refinance. Whatever your current situation is, chances are you can find at least one reason for your benefit.
Move to a Shorter Term: I wrote a blog post sometime back that went into the details of why moving from a 30 Year Fixed to a 15 Year Fixed could be one of the best financial decisions. In that post, I had mentioned that even if you have a rate that is below the current market rates, say 3.75% – moving to a 15 Year Fixed can save you hundreds of thousands of dollars. I considered an example of a $600,000 loan amount where the borrower was saving over $200,000 in interest cost by moving to a 15 year fixed mortgage. Yes – you read it right, over $200,000 (no typos here).
Of course the larger the loan amount, the more the savings. But even on a relatively smaller loan amount, you can save a bunch load of money by moving into a 15 Year Fixed from a 30 Year Fixed. Alternatively, you can move to a 20 Year Fixed or a 25 Year Fixed mortgage.
Two caveats being – You should qualify and you should be comfortable with a higher payment.
Move to a Longer Term: Sometimes, it’s the other way around. You got into a short-term mortgage to save on interest costs. But because of changed circumstances, you are finding it difficult to service the steep payments. In that case moving from a 15 Year Fixed to a longer-term like 20, 25, or 30 Year mortgage may be a better idea. You will save on your monthly payment and get the breathing room that you are looking for.
Move From ARM to FRM: If you have had an Adjustable Rate Mortgage and getting worried about the future rise in rates, moving to a Fixed-rate Mortgage (FRM) may be a good idea. This is recommended if you plan to keep the mortgage for a very long time. Since the FRM rate is at a very low level, locking in a low fixed rate for the life of the loan gives you peace of mind and a good night’s sleep.
Move From ARM to ARM: If your ARM loan is nearing the adjustment period and you are not planning to keep the loan for a long time, moving into another ARM will save you on interest cost. With 5 and 7 Year ARM pricing at least 1% lower than the fixed-rate, it makes sense to save on monthly payment and interest cost by moving to an ARM from another ARM.
Eliminate Mortgage Insurance (MI or PMI) Premium: Either your home prices have gone up or you have paid down enough on your principal or it’s a combination of both. You are at a point where you have 20% equity in the house or you can bring in some cash to do that. If that’s the situation and you currently pay mortgage insurance – it’s time to get rid of the pesky mortgage insurance.
Remember, as a married couple filing jointly, if you make more than $110,000 a year, the mortgage insurance premium is not even tax-deductible.
Get a Cash-out Mortgage: Whether you have been eyeing that brand new Tesla or you need to send your kids to an Ivy League college or it’s the round-the-world-trip you have been planning for – it all requires a lot of booty. And since you are not a pirate (and don’t even play one on TV), doing a cash-out refinance may be a great idea. Sure, you need to have a lot of equity and a cash-out refinance carries a rate higher than a regular refinance. However, it may still be a much less expensive option than borrowing from somewhere else or breaking into your retirement nest.
Get a Lower Rate: If none of the above reasons apply to you, it could be that you simply have a higher rate than the market. Maybe you had bad credit when you got the loan or you were on a sabbatical in a cave during the last 5 years. If that’s the case, you have the most uncomplicated reason to refinance. Simply ask for our best rate quote and we will get you started on the refinance process.
So there you have it – 7 reasons why you could and should refinance now. And if you were looking for a (bonus) 8th reason, the rates have trended about 0.25% below from where they started this year. So even if it didn’t make sense to refinance before, now is the time you should give it a serious thought.
With FED projected to continue tapering its bond purchase these super-low rates will likely go up soon. Take action now, instead of being sorry later. Contact me at 855.644.LOAN or email me at [email protected] and I will let you know if it makes sense to refinance or not. If you know me, you’ll know that I work for your best interest and not mine.
Not ready to get started now? Check out our helpful guide – How to Shop Mortgage Rates Like a Pro