Top Make Sense Reasons To Refinance

Take heed mortgage rates are still favorable, even if you took out loan as recently as last year. When it comes to refinancing, borrowers must have two components:  loan make sense + net tangible benefit.

Reasons To Remortgage Your Home

Lowering Or Getting Out Of Monthly Mortgage Insurance

Refinancing into a new loan
with no monthly mortgage insurance can easily save a borrower upwards of $150 per month, maybe more. As home prices have risen, getting closer to the holy grail 20% equity becomes a realistic to get rid of lender insurance. For borrowers who took out FHA Loans between 2010 through 2011, remortgaging into a Conventional Mortgage even with lender mortgage insurance is still a viable choice as the rate and insurance benefit is substantially lower than the mortgage insurance premiums imposed by the FHA. Beginning in April, FHA Insurance Premiums are slated to rise again making conventional choices more attractive.

Fixed Rate Loan

For homeowners coming out of an adjustable-rate mortgage, moving into a fixed-rate program will likely increase the payment as the rate could be upwards of .75% higher, on average. However, comparing the prospect of what future rates will do to the net tangible benefit attainable by moving into a fixed rate sooner, could a wiser option.

Paying Mortgage Balance Off Sooner

Taking on the accelerated payment of a 15 year fixed rate isn’t as challenging as it used to be, as managing the house payment over time becomes easier with a lower interest rate generating a lower payment. By moving from a 30 year mortgage to a 15 year mortgage, a homeowner can cut 15 years off the time it takes to pay off the house while the same time, saving 15 years worth of interest.

Cashing In Equity

Involves increasing amount borrowed for the purposes paying off debt, doing home improvement, replenishing liquidity/assets, perhaps in conjunction with a personal financial plan. This choice should be considered more carefully, and no doubt, will be more scrutinized by the lender (for net tangible benefit delineation), to minimize future debt accumulation.

Lower Mortgage Payment

Reducing the payment requires careful consideration of determining savings generated by refinancing i.e. lower rate longer-term with initial investment required to complete the transaction. Perform a breakeven analysis by taking the monthly savings divided by the closing costs. A more strategic return on investment approach, would be taking the annual savings generated by the refinance divided into the closing costs ( initial investment), in most cases, the return on investment will be much greater when compared to the returns offered by a bank account.

Real World Refinancing Advice

The old school mantra on refinancing was-unless the  interest rate is a full one percent point or lower, then refinancing simply didn’t make sense. That school of thought is a thing of the past as the movement of mortgage bonds and the normalcy of mortgage insurance have changed in recent years. If the savings justifies it, refinancing for even as little as .625% lower in rate could still be worth it considering the longer term interest savings. Generally in most cases, breaking even with today’s current rate environment, takes anywhere between 10-18 months. Searching for a refinance? Start by getting a no obligation refi rate quote today!

Posted in:

RELATED MORTGAGE ADVICE FROM SCOTT SHELDON

how to buy a home from family without needing any cash

How to buy a home from family without needing any cash

Have you ever considered buying a house from a family member? It’s a unique opportunity…

5 practical ways to increase your purchasing power when buying a home

How to avoid a contingent offer to buy a new home without selling your current home first

Buying a new home while still owning your current home can be a challenging process,…

Why you should wait for your credit to improve before applying for a mortgage

Why you should wait for your credit to improve before applying for a mortgage

In the current consumer landscape, securing approval for a mortgage is a significant challenge. It’s…

How to avoid getting a jumbo loan due to Coronavirus

New Mortgage Loan Limits for 2023

The Federal Housing Finance Agency announced on Tuesday, November 29th the new loan limits for…

View More from The Mortgage Files:

3 Comments

  1. […] you refinance a mortgage, the lender you’re paying off has to estimate the amount of days of daily interest […]



  2. […] to refinance your house? Deciding through the advertisements, telephone solicitations, direct mail can be mean […]



  3. […] process will be made much easier.” However, the reality is that regardless of whether you refinance your home with your current mortgage holder or with a different company, you’ll need to provide tax […]



begin your mortgage journey with sonoma county mortgages

Let us make your mortgage experience easy. Trust our expertise to get you your best mortgage rate. Click below to start turning your home dreams into reality today!