1. Refinance before the rates go up!
Lowering your interest rate lowers your payment. Interest rates are very volatile and change daily—sometimes a number of times in a single day! Let us show you how to set up a target interest rate, so that the lender will automatically lock your loan at that target interest rate we have predetermined.
If you’ve financed a mortgage in the last three years, chances are you probably don’t have a super-low “fixed” interest rate, more about ARMs later.
Let’s say in June of 2017, you received a Fixed Rate loan for $420,000 at 5.125% for 30 years. Just the Principal & Interest payment ($2,286.85) over the last 24 months, means you would have paid out almost $55,000. Just over $42,000 of that $55,000 is Interest. Meaning you’ve really only paid down your mortgage $12,434.26.
So you now have an outstanding loan balance of $407,565.86, and another 28 years before your dream home is yours. If you were to refinance into a new loan at your current balance, with a lower rate… You’re potentially saving $280+, per month over the next 30 years. That’s $101,000!!!
2. Combine your mortgages into one loan
You may be surprised that combining a 1st and 2nd mortgage may actually lower your monthly mortgage payment. Many people have a Home Equity Line of Credit (HELOC), which has an adjustable rate mortgage. Refinancing the HELOC or 2nd mortgage to a fixed rate can give you peace of mind that your payment will not go up in the future.
3. Remove or Reduce PMI
It is always a good idea to check the value of your home from time to time, especially if you have PMI or private mortgage insurance. Once you have 20% equity in your home, you can refinance out of your current loan into a new PMI free mortgage.
Mortgage Insurance (M.I.) protects the bank or lender in the event you default on the loan.
On Conventional Loans, if the initial Loan-to-Value exceeds 80% of the Value of the property, then you’ll be required to add Mortgage Insurance. The Good News is, once the LTV drops to a predetermined percentage (typically 78% on Conventional), you are no longer required to pay M.I.
VA Loans don’t require the borrower to pay Mortgage Insurance. FHA loans on the other hand DO require M.I., and depending on multiple factors, FHA could require you to pay Mortgage Insurance over the entire life of the loan.
Refinancing into a loan without a Monthly Mortgage Insurance Payment is a smart choice. The rate might be higher, but your payment can still be lower since you won’t have to pay the monthly mortgage insurance premium.
4. Pay off your mortgage faster
Changing from a longer term (30 year) mortgage to a shorter term (20 or 15 year) mortgage is one way to pay off your mortgage faster. When rates are lower than your current mortgage, you may be able to refinance into a shorter term that is close to your current 30 year mortgage payment. Another possibility is refinancing to a lower interest rate while making the same mortgage payment you are currently making. So although your payment goes down, making that same “higher” payment will pay your loan off faster!
5. Pay off Student Loans
Did you know that there are loan programs that allow you to refinance your student loan(s) into your mortgage? And without charging you a cash out interest rate?
6. Pay off a HERO, PACE or Solar Loan
Refinancing your current loan along with the HERO, PACE or Solar loan is a great way to save money. We can show you how to not only refinance these into one mortgage saving you money, but how to pay off your home faster by making the same payment you are currently making between your current mortgage and your solar payment to your new mortgage.
7. Paying off property Tax Liens
Many people do not realize that they can refinance their tax liens into their mortgage, as long as there is some equity in the property.
8. Cash-Out Refinance
There are many reasons to take cash out of your home by refinancing. Many home owners refinance their mortgage and take cash out for debt consolidation. Paying off credit cards and installment loans will lower your monthly credit liability obligations. When you pay off your credit cards, you will have less money going out to creditors and more money in your pocket each month!
Another good use of cash is for home improvements.
9. Switch from an Adjustable Rate to a Fixed Rate
Every mortgage has its start or initial rate, being adjustable or fixed. Fixed Rates never change; you pay the same amount on your first payment as you will on your final payment. Adjustable Rates starts at one rate (typically lower than fixed), then change (rise) after three to 10 years. Subsequently they can adjust (increase and decrease) every year thereafter.
Let’s say in June of 2017, you got a 5/1 ARM loan for $420,000 at 3.125% for 30 years.
Your Principal & Interest payment for the last 24 months as well as the next 36 months will be $1,799.18. After 5 years, with your 61st payment (in 2022), your Principal & Interest payment will increase based the outstanding loan balance ($374,252.84) and on the current market rates. Since this is just an example we’ll say the interest rate will increase to 8.125%, making Your New Principal & Interest payment on the remaining term $2,919.60.
In a scenario like this, by refinancing into a Fixed Rate before the interest rate adjustment, you’re payment will increase, but in the long run you’ll save close to $1,000 per month.
This Free Refinance Advisor has been designed to help narrow down options based on your individual needs. It’s quick, it’s easy, and the more questions you answer – the more accurate your results. You’ll receive the Refinance information you need instantly without all the calls and emails!