You applied for the home loan, provided every form of documentation about who you are, how much you make, where you work, how long you’ve worked there, bank statements, Letters of Explanation, verified rent, verified employment, verified deposits, verified your relationship to the seller… you’re done! You NEVER want to do it again! Well, guess what? You will. And here are five reasons why:
# 1 - Interest Rates Go Down
Right now rates are historically low. Even .5% lower than your current rate could save you $50-$75 monthly depending on your loan amount. This is a no brainer! You could literally save thousands of dollars over the life of the loan. Maybe you are worried about going back into a 30-year fixed mortgage? Maybe you only have 23 years left on your current mortgage, does it still make sense? Absolutely! Today Lenders have different amortization options. You could refinance to a lower rate AND a lower term, like a 20 or a 25 or even a 23-year fixed rate.
#2 - Mortgage Insurance
If you are like most Americans, you put as little down as possible on your first home purchase… After all, not everyone has 20% to put down! And that means you probably have some sort of Mortgage Insurance, either through FHA or your Conventional MI companies. Even if you did a Lender Paid MI option, that still means you got a higher interest rate for it. Your equity may have grown and reviewing your payment with your Mortgage Professional is a very good way to find out if you could be rid of that extra Mortgage Insurance in your monthly payment by refinancing.
#3 - Lower your term
Maybe rates haven’t significantly gone down since you purchased, but you have a new job, or an income change. By refinancing a 30-year fixed into a 20-year fixed rate mortgage, you not only shave off years, but Lender’s offer lower interest rates on shorter term loans.
#4 - Need Cash to Remodel
Is it time to remodel the bathroom or kitchen? Maybe put a new roof on the house? Get it done with a Cash-Out Refinance or a Rehab Refinance. This is a great strategy that allows you to build equity and keep the financing tied to the home rather than a credit card. Low interest rates are available AND with a Rehab Refi you have a set time table to get the work done, which is helpful for us procrastinators.
#5 - Debt Consolidation
The average American household with Credit Cards has $15,762 in credit card debt. If you review your situation with a Mortgage Professional you may be able to refinance your home with a good rate and consolidate the debt into the new mortgage. This could lower your monthly expenses and give you a clean slate. A strong word of caution. Clean slates tend to get dirty again if you don’t get your spending under control. This is not the solution for everyone, but for the right person this can make the difference between saving for retirement sooner than later.
Three Reasons NOT everyone will refinance their home.
#1 - Numbers don’t make sense… yet
You’ve explored all the options and none are saving you any money… yet. Rates go up and down, circumstances change, and your equity in your home changes. Keep in touch with your Mortgage Professional and look at what the markers are to benefit you. Is it your home value going up? Is it your principal balance going down? Is there a key interest rate that would make the difference that your lender could watch for? These are important factors to know with your most valuable investment.
#2 - Embarrassment
You bought your home and then life happened. Lost a job, had a divorce, filed bankruptcy and now you are worried about what your credit looks like or what someone will say if they can see how messy this all got. Fear not, a true mortgage professional is not going to judge you. Most of us enjoy helping people unravel this credit jumble and getting it all cleaned and organized again. Even if a refinance isn’t possible…yet, your mortgage professional can help you create a plan to get you back on track!
#3 - Stubborn
All the right reasons are there to refinance… Save money, lower your rate AND your term, but you still don’t want to do it. “It’ll take too much time.” “It’s such a hassle!” “I don’t want to deal with all the paperwork!” – These are all emotional responses to your last experience. Maybe you need to talk to a different Mortgage Professional, maybe you need some therapy for your PTMD (Post Traumatic Mortgage Disorder), but you need to move forward. Emotional decisions made about money are bad decisions. What could you do with that savings? Pay off more debt? Pay off your current mortgage faster? Invest in a retirement account? Maybe you feel like paying more money to the bank is good for the economy, that’s up to you. Just don’t make it about emotion… that’s probably what got you here in the first place.