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Should you consider a mortgage refinance?

Most people only consider a mortgage refinance when rates are falling and even though rates have increased slightly there are times refinancing still makes sense. Mortgage rates are still below historical levels and the reasons for refinancing involve more than just lowering your rate.
Is there a scenario when you can still lower your rate with a refinance?
The most common is when you want to shorten your remaining term. Rates for shorter terms such as 10 or 15 year mortgages could still be much lower than your current 30 year fixed loan. If you have the ability to make a slightly higher payment, now might be a good time to lock in a low rate and pay your house off quicker.
What is another common reason for refinancing in today’s rate environment?
Consumers who started with an adjustable rate mortgage and are nearing the end of fixed period might want to consider refinancing to a fixed rate. It will depend upon several factors including how long you plan to stay in your current home, but now might be the time to flip to a fixed rate loan and avoid having rates increase drastically as well as the monthly payment.
Were some people unable to refinance in the last couple of years?
Yes, sometimes because of the value of their home or their financial situation made them ineligible to refinance but now they might qualify. Especially if their financial situation has changed with improved credit, higher income or even a change in the type of income.
What are couple of reasons that people should consider for a refinance?
The two most overlooked are consolidating debt and funding major home renovations. People often default to home equity loans for these purposes but a mortgage refinance with a cash out option is sometimes the best financial move to make.
What makes a cash out refinance a good option to consider?
Allows for a lower rate - mortgage rates are going to be considerably lower than home equity rates. The second major benefit is that only one loan payment will be required, which is likely less than having separate mortgage and home equity loan payments.  This really helps with cash flow.
Does a mortgage refinance have higher costs than a home equity loan?
Almost all of the time the costs will be higher but in a very short amount of time you will recoup savings that will more than offset the higher initial costs of a mortgage refinance.  The savings will mostly be driven by the lower overall interest expenses from a mortgage loan versus a home equity loan.

Posted: 9/22/2017 with 2 comments

Categories: Homeownership, Loans, Money Matters

Awesome blog
7/22/2019 7:44:55 AM

Great post.
3/13/2019 11:36:26 PM

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