(Mar 26, 2023)
Many homeowners are aware of what a refinance is, but not many know of the different types of refinances that are offered, and some could be more beneficial to them than others. I want to explain why now is the time to refinance your home as well as some of the best refinance programs that we can put you into.
The Perks of Low Rates
The main reason homeowners are refinancing their homes is to take advantage of the low rates. At the end of the day, these low rates will save homeowners tens of thousands of dollars in interest. For example, if you purchased a home between 2017 and 2019, you are looking at an average rate of 4.32%. We are currently refinancing homes at an average rate of 2.8%. This may not seem like a drastic change, but the average refinance is saving borrowers roughly $450 a month which certainly adds up over time. If you are a homeowner and currently have an interest rate above 4%, you need to check out your options to see how much money you will save by refinancing your home.
Reap the Benefits of a Fixed-Rate
Not only are homeowners taking advantage of the low rates in 2021, but this also gives them an opportunity to get out of an adjustable-rate mortgage and lock into a fixed rate. Although ARMs start out offering a lower rate than fixed-rate, periodic adjustments can result in rate increases that are higher than the rate available through a fixed-rate mortgage. When this happens, converting to a fixed-rate mortgage results in a lower interest rate and eliminates any concerns over interest rate increases.
Think About Refinancing at a Lower Year Rate
Refinancing to shorten a loan term has also been very popular. When interest rates fall, many homeowners will look for a refinance if they do not plan on staying in the home for the remainder of their current mortgage terms. Refinancing from 7% to 3% can cut the term in half to 15 years with only a little change in the monthly payment. If you are currently in a 30-year fixed rate, one thing to consider is refinancing to a 15-year rate. Not only will this save you a fair amount of money, but you can also get an even lower interest rate on a 15-year compared to 30 years.
One of the most popular types of refinances that we are working with are cash-out refi’s! Homeowners can access the equity in their homes to cover major expenses, such as remodeling the home or paying for your child’s college education. Many homeowners are going this route because you can lock in a low rate for the long term. It doesn’t make any sense to go to your local bank to take a loan to pay for these big expenses – mainly because the interest rates will be outrageous. Like any other fixed-rate mortgage, homeowners can do a cash-out refinance and maintain a very low rate for 30 years.
The bottom line is refinancing could be a great financial move for many reasons. Lowering the mortgage payment, reducing the term of the loan, or helping you with major bills can all work in a homeowner’s favor. If you have a lot of debt, a refinance could be a great tool in clearing up your financial situation by saving you money long term. All homeowners are in different situations. If you’re looking to build equity and reduce debt, a cash-out refinance is not your best option. But, if you’re looking to pay off a big expense, like education, a cash-out refinance is the way to go. It’s best to consult with a mortgage advisor to see which route makes the most sense for you.
(Mar 26, 2023)
