Refinancing Your Current Home Mortgage; The Benefits

Refinance Your Home Refinancing; with interest rates historically low earlier this year it made complete sense to refinance a home for a lower interest rate. However, since interest rates have gone up within the past few weeks some might be reconsidering. I am here to say that refinancing is still a wonderful option if your home value is above market price or if you have a high interest rate on your home. There are so many benefits to refinancing. For example, refinancing on your current mortgage can reduce your monthly payments. For example, if you were to change your loan from a 15-year-fixed loan to a 30-year-fixed loan, with a 7% interest rate, your payments would go from $1,792 to $1,329. This is $463 that you get to save – every month!

Another current advantage to refinancing a house at this time is lower interest payments. If the current interest rates you are locked into are higher than today’s rates, it is possible to refinance for today’s rates. Let’s take the same example of a $200,000 mortgage loan at a 30-year-fixed rate. If this particular mortgage loan refinanced from 6% to 5%, it would save the homeowners around $45,000 in interest payments over the lifetime of the loan. For those who currently have a variable interest rate or interest-only mortgage, fixing your rate with a refinance can give you peace of mind in knowing that your interest rate (and payments) will no longer go up.

Refinancing; a success story

Recently, a client of mine decided to refinance on their home. They raised two children in the home and were trying to decide between selling the home as a short sale or refinancing the home (their grown children were devastated by the idea of losing their childhood home). I was able to ask them about their refinancing experience. At first they went to someone suggested by family. Once the hours of paperwork were in it would have cost them $6,200 to refinance. However, after I worked with them and was able to go over their financial situation they were fortunate enough to lock in at historically low rates in May of 2013. They “…refinanced because the interest rates got as low as they did. The big thing now is – the smart investment is not to have large principles in real estate prices due to variability but the lowest payments possible.”

The couple figured that “you’re going to have to pay rent somewhere so you might as well get in a home to live in at the lowest rate possible instead of living and paying rent at an apartment.” Just how successful was their refinance? Well, if we get down to number their housing payment was “$2,302.63 a month. We were at 5.625%. It was a 30 year fixed. Jesse brought us down to 3.75%. It dropped our payments down $500 a month. We refinanced around $373,000 and our closing costs were about $2,700. We tried another guy first for refinancing but his closing costs – since it was a hard loan – were up above $7,000. Now we’re saving $500 a month and we’re putting it away for retirement – putting it away for a rainy day.” It was a wonderful experience not only for the clients but for me as well. The couple is able to save money and it makes me extremely happy that they are able to save for their golden years.

WHY IT’S A GOOD TIME TO REFINANCE

If you’re on the fence about refinancing then it’s the time to decide, commit, and lock in your rate. Home values are going up and they are estimated to continue to rise. This is especially true of the West Coast (Seattle included!). However, with rising house values there are estimations of interest rates to rise as well. Rates are slated to increase to 6% in 2014. This week, on the other hand, we are seeing a decrease in interest rates. Now is the time! If you have any questions about refinancing please feel free to ask me. I am happy to help you find exactly what you need and discuss what your new mortgage payment would be.

As always, please check out my blog at http://www.jesseituttle.com for more information!