10 Reasons to Refinance Your Home Now
Purchasing a new home is always an exciting time in our lives, but as the years start to fly by, that monthly payment gradually starts to eat away at you. Or maybe your interest rate isn’t all that bad, but you’re currently living in a desperate situation where you need a little extra cash? Whatever your situation, maybe refinancing your home can help you save a ton of money, or at least help simply survive from month to month. These are 10 reasons why you need to refinance your home now. Check out these 10 reasons to refinance your home now.
“Prepare Your Family For Survival” by Linda Loosli
11 Things You Should Do Before You Die
#1. A Lower Interest Rate, Along with a Lower Payment
Making the decision to refinance your home by going with a lower interest rate and the resulting lower mortgage payment will save you a bunch of money over the years. But it’s important that you do your homework ahead of time so that the structure of the loan is what you are looking for. This includes what interest rate, when to lock, and how long a period you’re getting locked in for.
If you’re not satisfied with the rate that a certain lender is offering you, you still have the option to shop around even after you’ve already been pre-approved. Nowadays, the rate is primarily based on your credit score and the length of the term for your loan.
#2. Reduces the Life of the Loan
Refinancing your mortgage will give you the option to shorten the term of the loan. Who doesn’t want to get out of making monthly payments earlier? Doing so can greatly reduce the amount of money that you are paying out throughout the rest of the life of the loan. That’s because the interest rate will be reasonably lower, saving you tens of thousands of dollars.
Yes, you might have to pull more money out of your wallet each month for a payment, but more of that payment will be directly put towards the principle of the loan. You’ll have many more years afterwards to save that money and use it in whatever way you choose. This is one of the major reasons to refinance your home now.
#3. To Increase the Loan Term
This is the exact opposite of what I just went over with you, but everyone’s circumstances look a little different. For some people it’s extremely hard for them to make their current monthly payment and they need some sort of a break. If this sounds like you, you have the option to increase the life of the loan so that your monthly payment is more manageable for you and your family. While you’ll pay more money throughout the life of the loan, it will be much more reasonable for your current situation.
#4. Your Credit Score Has Significantly Improved
Your credit score may not have been all that great when you first purchased your home. If your credit score has gone up at least 20 points, it may be enough to reduce your rate and save you thousands by the time the life of the loan is finished.
#5. Home Equity Rising
Are you currently dealing with expensive insurance premiums with your FHA loan because you were unable to put up to 20% down when you purchased your home? Refinancing your FHA mortgage is one of a couple of ways that you can do away with them.
There’s also a good chance that your home value has gone up in recent years. With your home equity appreciating over the past few years, your home may have reached 20 percent equity already. If you are used to making that payment, after you refinance continue making that payment because now that extra amount will go right to the principal instead of mortgage insurance. Be sure and specify the extra amount as a principal payment. Therefore, your mortgage will be paid off sooner.
#6. Get Cash Back to Help with Other Bills
Are you in dire need of cash now to help pay for other bills that you’re struggling to pay? Refinancing your home to get cash back might make sense for you. Just keep in mind that cash-back refinancing typically involves refinancing your mortgage for a larger sum of money than what you currently owe, and the bank still views your home as collateral.
Getting cash back when you refinance can help you pay off high-interest credit cards and other debts. Many people use that money to make home improvements too.
#7. Reduce or Shorten Your PMI (Private Mortgage Insurance)
A handful of years ago, the Federal Housing Administration (FHA) changed its rules about homeowners having to pay for mortgage insurance for the entire life of the loan, especially for those that were not able to put at least 20% down.
When you choose to lower your interest rate by shortening the life of your loan to a 15 to 20 year refi, it gives you more flexibility by lowering or getting rid of your private mortgage insurance. That can save you a lot of money by the time the life of the loan is complete. There’s also the possibility that you can still get cash back on your home.
#8. Rates Could Be On the Rise Soon
If the interest rate on your home is more than 5%, there’s no reason that you can’t get a lower one by refinancing. Mortgage interest rates have been at an all-time low for a couple of years now, but those rates are starting to trend up again. With interest rates that are expected to rise, choosing to refinance today will provide you a number of benefits within a year and in the years to come.
#9. A Fixed Rate Could Save You Money In the Long Run
Do you currently have an adjustable rate mortgage with an interest rate that fluctuates? This can be expensive and aggravating as a homeowner when the ARM is moving upwards. If you are planning on living in your home for many years to come, making the decision to switch to a fixed rate loan will certainly be cheaper in the long-run.
#10. Getting a Divorce
When two people co-own a home together but are making the decision to separate, the spouse that is planning to continue on living there will want to consider refinancing their mortgage.
That way the other spouse is no longer connected with the loan on the house. There are also other instances where you may need to refinance your home. If you are looking to get out of sharing a loan with a friend, partner, relative, or a business partner, refinancing the loan will need to take place.
Final Word
The time for you to think about refinancing your mortgage has honestly never been better. These are 10 of the best reasons for doing so, but there may be others. Have any of you benefited from refinancing your home over the years? What’s your story? Do you need to improve your credit score? These tips are for you! May God bless this world, Linda
Copyright Images: Home with Red Door Deposit photos_8751337_s-2019
what is a good company to go with? I checked out one online company very well known, and their fees were super high so I said no
Hi Janet, I used to own my own mortgage company for 15 years. I’m going to email you. Linda
If you need the company we used, it was done in 4 weeks. No bs to contend with.
However, we are retired, so less things to answer or provide.
Let Linda know and she can get the company. Husband and wife business.
Never BofA ever again!!
Heard so many bad things about them and never had a problem until they offered us a HELOC at 10%–oh, yeah, they did!!!
Hi JayJay, oh my gosh, I love your comment! WHY? Because when I had my mortgage company, B of A was the WORST to work with!! Literally! A HELOC at 10% are they nuts?? Who would pay that, thanks for sharing my friend! Linda
Yes, Jay Jay I’d be interested in that company!! Thank you!!
Hi Janet, here is the link JayJay put in. https://www.bankrate.com/calculators/mortgages/amortization-calculator.aspx
Please understand, debt of ANY kind makes me very nervous, so that thought of putting my home at risk, for any but the most critical of reasons need to be considered VERY carefully.
I respect the fact that there may be a very valid reason to refinance, but think twice before taking that step.
#1, Watch those fees. A bank or finance company is looking out for their bottom line, not yours. Remember the housing disaster of 2008.
#2 NINE time out of 10, you can reduce the terms of a mortgage without the need to refinance through the help of an amitorization schedule. I know, because we paid off a 30 year mortgage in 5 years, decades ago at a major savings in interest. Not to mention we still benefited from the standard deduction.
#3. The foolish idea that mortgaging your home allows you to invest elsewhere, and save taxes is finance people slight of hand. The more you invest with them, the more they make. For me, I’ll pay the $25. In taxes, and keep the $75 in my pocket, which others, pay the $100 in interest to save $25.
#4. It’s your HOME. The security and sense of peace found in not having a mortgage hanging over your head is beyond measure.
For our family, the banks need us far more then we need them, and I can go to the mailbox without a fear of dread. Please Think long and hard before putting your home at risk.
Hi Chris, I totally agree with you. I used to own my own mortgage company and I saved people thousands of dollars. I was successful because I was not a greedy loan officer. Today is all about letting people know they have options and the interest rates are lower than when I bought my first home 50 years ago. It’s all about saving money and having zero debt. Linda
I want to owe as much as I can manage in a mortgage payment—Why?/ Because I have no family and will be going to a senior facility and they WILL take my home if paid for–I know this because I visited a nursing home for years…several of those folks had children that told me that is what happened and I researched a little.
Hi JayJay, you are so right, I know that for sure! Linda
Jay Jay, I respect the position you are in, and realize you hav have to do what works best for your situation. Stay safe and healthy
What works for us: 30 year mortgage, but calculate what payments would be if
it was a 15 year loan. We pay the difference towards principal reduction.
We are older (& my husband is 18 years older than me). So, if/when something happens, the surviving spouse is not committed to the higher payments, but can benefit from all that have been made.
Hi Laura, I totally agree with your idea. I used to own my own mortgage company and I always suggested this scenario. Right On! Linda
BINGO—the right way to think. Like I said, I can get my balance back to July before we refinanced if I wanted to–but why would I???
I have no need to and like a break from the higher pmt for 12 years.
I also have no need to fret about taxes and homeowners now, because the savings I acquired is paying that…
This is a very responsible woman speaking married to a very irresponsible man with a form of dementia that spends foolishly and is so immature, goes to the bank almost daily for his balance–he won’t record checks or atm withdrawals–he has brain damage and it’s like living with a 6 year old.
He is on his way now from a hospital visit after receiving a cardioversion for irregular heart beats stealing his breath away.
I needed peace of mind and refinanced.
Maybe my situation should be reason #11?? LOL
Hi JayJay, oh I’m so sorry for you and your husband. I have watched many family members deal with dementia. It’s a 24/7 role with no breaks. Oh, I need to add a #11! May God bless you both, Linda
Hi Laura, that is what my husband and I did, and I suggested the same to my clients when I owned a mortgage company. That way if you have a setback you aren’t locked into the 15-year mortgage. AND if things went as planned or hoped for, you’re house is paid off in 15 years! Less interest, yay! Linda
Oh, my. In July, BofA declined us a re-fi with 12 years doing business and no late payments–said they had no program for us. Translation? We got you @ 6.25, why would we??
We re-financed in 4 weeks with a company in Bowling Green—yes, 4 weeks exactly….added a few years and cashed out 10,000(I really just got back my 10,000 I paid in March on the principal, 2020)and our mortgage decreased $360.
Yes, I know, if I pay that toward the principal, I can return to mortgage balance in a year…I don’t have family, husband has no family–so, who cares???
I really sleep better knowing my mortgage, property taxes, and homeowners is less than most folks mortgage!!!
AND>>>>.. like I wrote yesterday–a mortgage agent told us–never pay toward the principal until you have saved a few thousand…pay half/save half and resume saving.
Why??
Security–that mortgage company doesn’t give a flip if you paid extra(as was shown by BofA) but they will give a flip when you can’t pay for 3/4 months or longer–their win.
Save, then pay on principal leaving yourself with a good nest egg.
Learn from this old woman.
When husband dies, I can stay here now—-I’ll be cutting corners, but can do that gladly.
Hi JayJay, great comment, thanks for sharing. You are so right, on every aspect, AMEN! Linda
https://www.bankrate.com/calculators/mortgages/amortization-calculator.aspx
One I use.
Hi JayJay, thank you for sharing, we all need a good company! Linda
I know the responsible thing to do and how to save money, but not all of us have that option and at times need to do what I did.
Did I hate paying 3500 fees?? Well, Yeah. But I got it done in 4 weeks with 2 phone calls and no BS.
BofA took paperwork, said it would be 6 weeks before they would begin real work(whatever that is!! LOL) and declined us in less than 5 minutes…How do I know??
After spending 2 hours on phone answering questions, I called another agent to give info about ourf our property taxes, etc……and he said…..ma’am, you are declined!!
It had been 5 minutes of disconnecting with the loan agent.
Stay away from BofA and Terminix.
Thanks for listening.