We know life can get busy, but taking the steps to start refinancing your home could make your life a lot less busy, and a lot less stressful. That’s because it takes a major financial burden off you—both short and long-term.
Many of us our drowning under our monthly mortgage cost, yet we haven’t made any move to start the refinancing process. Below are four major ways refinancing could save you big bucks.
1. 30-YEAR FIXED RATE MORTGAGES
It used to be that 30-year FRMs were the ones everyone wanted. What could be better than a long-term FR to pay off your loan? Well, how about a much lower interest rate? The new mortgage rate to strive for is a 15-year FRM. You cut your term in half (15 years is still a plenty long time) and receive a much lower interest rate which equals major savings long term. Of course, this will result in higher monthly mortgage, so you need to be sure you can handle the payments.
2. ADJUSTABLE RATE MORTGAGES
According to the Federal Reserve Board’s The Consumer Handbook on Adjustable-Rate Mortgages, an ARM’s interest rate changes periodically so your monthly payments and interest rate can go up or down. Unlike a FRM where you always know your monthly payments, ARMs can blindside you with high monthly payments when interest rates adjust. In other words, if you qualify for a FRM, lock it down. Interest rates are anticipated to rise next year.
3. INFLATED INTEREST RATES
Today’s interest rates are at an all-time low. So, even if you think you have a pretty low rate, looking into refinancing could save you more money every month. How much you save is based on your loan’s rate and terms, but considering how long you own your home (possibly the biggest purchase you will ever make) it’s worth looking into. Also, why pay anymore than you have to? It’s like paying your bank extra so they can take your well-deserved vacation!
4. CONSOLIDATING FIRST AND SECOND MORTGAGES
Life happens, and sometimes, you just need a large sum of cash. Taking out a second mortgage on your home should be your last resort, but if you’ve take advantage of this option and can qualify to refinance, consider merging your two loans to save money. If you “bundle” both mortgages into one loan, you can secure one low interest rate which saves you money over the life of the loan.
The truth is, refinancing your home does cost money (according to the Federal Reserve Board, a mortgage will cost about three percent of your home’s value), but this cost can be built into your refinanced loan, saving you money long-term for trips, tuition costs for your kids, or money toward your retirement.