Have You Refinanced Yet?

With mortgage rates at historic lows, it’s the perfect time to consider refinancing your home if you haven’t done so already. If you’re looking for ways to cut costs and save money in 2021, then taking advantage of these current rates with a new loan should be at the top of your list.

Top Reasons to Refinance

As a homeowner, it is so important to understand the benefits of refinancing your home before you move forward. This list highlights the top reasons to refinance, and you can determine if any of these could be part of your own financial goals in the coming year.

• Lower your monthly mortgage payment – This is usually the #1 reason, and it’s easy to see why. You’ll have more money in your pocket each month. Plus, you could lower your borrowing costs.
• Change your mortgage term for more equity – You could convert to a 15-year mortgage if you currently have a longer-term mortgage to gain more equity in your home and pay off your loan sooner. You’ll be paying less in interest over this loan period.
• Change your mortgage term for more cash flow — You could increase your term back to a 30-year mortgage if lower monthly payments and more cash flow are your priorities. If it’s your forever home, then don’t be concerned if you’ve stretched out your payments over a new 30-year loan.
• Switch from ARM to fixed rate mortgage for more stability – If you plan to live in your home for more than 5 years, take advantage of lower rates on fixed loans now before your Adjustable Rate Mortgage’s discount period rises.
• Say good-bye to PMI – You could save hundreds without this mortgage insurance that your lender required. If you’re at 20% equity with your home, a new loan can eliminate PMI.

Understand the Process

Refinancing can be confusing for many homeowners, especially if you’re not sure if it will make financial sense or if you’re a good candidate for it even if rates are low.

Don’t hesitate to reach out to me for help. I can provide recommendations for reputable lenders, review any estimates you receive, and even help you determine if it’s a good choice for you after we access your break-even point and other financial factors.

Let’s look at some important points about refinancing so you can better understand the process.

A lender needs to approve you for this new loan.  Remember, this is a new loan and a new review of your finances by a lender since your last loan. We can go over the factors that will help you qualify to refinance.

Here’s a quick rundown of what lenders look at:

• Have at least 20% equity in your home;
• FICO credit score of 620 and above;
• Adequate home equity or loan-to-value ratio;
• Sufficient income that hasn’t changed much since the last time you took out your mortgage;
• Stable employment for the past two years;
• Sufficient asset reserves (checking and savings account, stocks, bonds, retirement accounts);
• No loose ends such as unpaid bills and liens, etc.

Refinancing requires upfront costs and fees.  It costs money to refinance and will it be worth it for you in the long run?  We can look at your current financial and personal situation to see if it makes sense to move forward.

• Don’t refinance if you plan to move sooner than later since it may take a while to actually recoup the cost of the refinancing. Figure out the math and break-even point of how long you need to stay so you don’t lose money.
• Most experts say only consider refinancing if you get a minimum two percentage points difference in your rate. If your current rate is already low, it may be not worth the cost to refinance.
• Fees to refinance could average around 2% of the new loan amount, which can eat into any money you saved with a lower mortgage rate. Shop around and get written estimates so you can compare each lender’s costs.
• Refinancing costs include appraisals; inspections; application, underwriting and processing fees; and even a penalty for refinancing too early on your original mortgage. Plus, don’t forget there are closing costs! These may be rolled into the loan, but many financial experts advise against it.
• If you’re underwater, you won’t be able to refinance your loan unless it’s owned by Freddie Mac or Fannie Mae. You’ll need to check out the Home Affordable Refinance Program to see if you qualify.

I’m Here to Help!

If you haven’t already refinanced and you plan on staying in your home for a while, get to it.  No one knows how long these historically low rates will continue and they aren’t likely to get any lower.

Here’s how I can help as you consider the options:

• I work with great lenders who have low rates and make the process as easy on your as possible.  Or, if you have a “different” type of situation, such as being self-employed or don’t have a lot of equity in your home, I have lenders that can help with these out-of-the-box scenarios
• We can talk through whether it makes financial sense to refinance now.  There are several factors to consider including how long you plan on living in your property, what your current interest rate and payments are, and how much equity you have in your home.  Refinancing doesn’t make sense for everyone, so let’s work together to find out what’s best for your situation.
• I can help you compare the options and pricing from different lenders and help you make the best decision.
• I can help you make sense of the loan summary sheet and calculate your break-even point—the month when the monthly savings outweighs the cost to refinance. That way we know for sure it makes sense to spend the time and money going through the refinance process.
• In addition to reaching out to me, it’s also a good idea to consult with your financial advisor. If you don’t have one, I can recommend one, just let me know.
• I’d love to hear from you! Please contact me if you have any questions or want to talk through what makes financial sense for you. Remember, I’m here for you even if you aren’t buying or selling anytime soon. This is just one way I can help you continue to make good real estate decisions.