The most common misconception about refinancing a mortgage is its only worthwhile if you can reduce your interest rate. Rate reduction refinances are largely market-driven and actually represent just one of many advantages refinancing can provide. Let’s take a look at the top 5 reasons why you should consider a refinance in this market:
1. Retirement
If retirement is still in the planning stages, consider aligning your plan and loan term. If the typical 10, 15, or 20 year terms are not ideal, we can discuss tailoring the term in other annual increments. For those in shorter term loans already, such as a 15 year, consider refinancing into a longer term loan such as a 20 or 30 year. This could free up funds to make 401k catch-up contributions or reduce your obligations to create more retirement comfort.
If retirement is already here, consider extending out the loan term to 20 or 30 years to free up some monthly breathing room. You’ll still get the tax benefits and with our loans you can always pay more.
2. ARM’s
Nearly every ARM adjusting in the next few years will increase by the maximum rate allowed. This means big rate and big payment jumps ahead. If you’re moving in the next 5-10 years, consider refinancing into a new ARM and avoid the big increases. If you’re planning on staying for the duration, consider refinancing into the stability of a long-term fixed rate and eliminate all the guesswork.
3. Mortgage Insurance (MI)
Value increases have enabled many to reduce or even eliminate MI. However, some loan programs, such as FHA, require MI to be paid for a specific time or even permanently. Take advantage of this current intersection between values and rates to reduce or eliminate MI.
4. Debt consolidation
There’s arguably no greater financial headwind than high interest debts such as credit cards, unsecured loans, etc. With endless offers bombarding us all daily they can be hard to resist. Before you know it the limit is reached and you’re chasing your tail trying to pay down the 12- 20+% interest, much less the balance. Homeowners with high interest or variable interest debt need to very seriously consider utilizing their home equity to stop the vicious circle and get on the path to wealth.
5. Leverage Your Equity
Whether it be home improvements to enjoy your home long-term, much needed repairs to prep your home for sale, buying a second home or rental property, or paying off ballooning student loan balances, there is no shortage of financially wise reasons to consider leveraging your equity. Now is the time with values on high and rates hovering near lows.
