Now Is the Time to Refinance

Now Is the Time to Refinance

Senior Loan Officer
Brian Decker
Published on October 4, 2021

Now Is the Time to Refinance

Are you stuck with a home mortgage that has an interest rate that starts with a 3%? Would you like to consolidate those high interest rate loans or credit cards into a new low fixed rate mortgage? Well, now's the time to refinance. Let's look at how refinancing could save you money.

The U.S. Has Been Enjoying Low Interest Rates

Mortgage rates have been at historic lows. The federal government has helped keep interest rates low to ease the burden on homeowners during a slow economy. Some homeowners are qualifying for mortgage loans as low as 2.5% .

The low interest rates mean that homeowners will have more available money for other necessary expenditures besides their mortgages. The low interest rates also encourage people to borrow and spend. For example, investors are more likely to snatch up new properties when the rates are favorable.

Low interest rates are not only a great thing for investors but a huge benefit to those who have mortgage loans with PMI or a mortgage rate over 3%. They can refinance, get rid of their PMI, consolidate high interest debt or simply just get a much lower rate, and save money each month.

Exactly When Should I Refinance?

When should you refinance? Typically, you want to refinance any time that it's going to be worthwhile. Usually, that means that the mortgage rate has dropped at least 0.5-0.75 percentage points. However, there are circumstances where the rate can drop less, and yet you still profit.

How Can I Know If Refinancing is Worthwhile for Me?

One of the primary factors that you need to consider is the cost of arranging the refinance. How much will closing costs be compared to how much your will save? Now remember nearly all refinances cost $0 out of pocket. So lets say you are able to payoff $20,000 in credit card debt while lower your mortgage interest rate by 1%, saving you $500/mo.

So, let's say that it will cost you $3,000 to refinance, and you intend to keep your home for another 5 years at least, so 60 months. When we divide $3,000 by 60 months meaning it will cost you approximately $50/mo to save to save that $500/mo.  So as long as you stay in the home for at least 6 months after refinancing, every month after that 6th month you come out ahead $500 in savings.

It's important that you consider how long you will keep the mortgage. Few people these days remain in their homes for the entire 15 or 30-year period of their loans. So, make as accurate an estimate as possible about the number of months you will keep the mortgage. That's the only way to get a realistic view of how well you could benefit from refinancing.

How Often Can I Refinance?

If you've refinanced in the last year, you may still be eligible to refinance again. Generally, you can refinance whenever the mortgage rate drops in your favor.

However, there are certain restrictions for government-backed loans such as VA, FHA, and USDA loans. There is also typically six-month waiting period between refinancing if your last refinance was a cash-out
Many homeowners take cash out to consolidate solar loans, student loans, credit cards, high interest car loans or simply to put some extra money in the bank.

It's Your Time to Refinance

As the U.S. economy rebounds, you can expect interest rates to increase. That means that the clock is ticking to benefit from historically low rates.  Mortgage rates are expected to rise to around 3.75% by mid 2022.

If you want to take advantage of current low interest, contact us today to get the lowest available rate. It's your time to refinance.

Senior Loan Officer
Brian Decker Senior Loan Officer
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