Home refinancing has recorded a boom in 2020. Most homeowners have preferred refinancing their homes due to the current favorable conditions, such as low mortgage rates, attributed to the Fed. The Fed has played a significant role in keeping credit flowing, which translated to historically low-interest rates that allowed many to refinance their loans. If you’re still stuck on whether to refinance your home loan or not, I’ll give you a few reasons why you should consider refinancing your home loan.
- To do away with mortgage insurance.
Home prices have surged in most parts of the country; I bet in your area too. This means that your home value has increased, which translates to more equity from it. If you currently have a mortgage loan insured by FHA, the increase in your equity presents you with a huge opportunity. With 20% equity in your property, you can refinance into a conventional loan to get rid of mortgage insurance expenses. This allows you to save, which benefits you during these tough times.
- It will lower your interest rate and monthly payments.
Currently, interest rates on mortgage loans are historically low and are expected to remain that way going into the near future. This means that homeowners will pay lower monthly payments and less interest paid in the long-run. In other words, when you refinance now, you will be entitled to pay less interest rates. This will allow you to save up some cash and leave you with more money in your pocket.
- You can make additional investments.
If you plan to make additional real estate investment, but you lack funding, you can consider a cash-out refinance. You can use the funds as a down payment on your additional investment; preferably, it should be an investment that will be generating income. With the additional income, you can comfortably cover your payments. In other words, you can use refinancing as a source of funding to make additional investments that can help you in settling the debt.
- To consolidate debts and loans.
A cash-out refinance gives homeowners a chance to tap into their homes’ equity to consolidate debts. With the historically low mortgage rates, cash-out refinances have posed as the best option for homeowners planning to pay off debt. In cash-out refinancing, your mortgage balance is directly proportional to the amount of your equity you decide to cash in on.
However, before you plan on taking the cash-out refinancing route, there are a few factors that you may need to consider. First, know how much equity you have on your home. This is because refinancing may help you do away with mortgage insurance on FHA loans, but it can also cause you to incur mortgage insurance if you take out above 20% of your property equity. This is not limited to FHA loans only.
Secondly, consider having a plan of action concerning how to maintain your total debt low such as auto loans and credit cards. To make the right conclusion, you need to develop a comprehensive plan to streamline your debts into a single loan.
- To finance renovations.
The rising home prices have left many homeowners with more equity in their homes. According to Black Knight, about 45 million homeowners have average equity raging around $125,000 per owner at their disposal. This equity could be transitioned into cash through a cash-out refinance, which you can use to renovate, upgrade, or your home. “Lots of people are looking to improve their property and add on space through refinancing,” Citi Producing Lending Manager Brent Zambon says. “This lets them move in aging parents or loved ones who might need more care and assistance.”
Folks, you have all the reasons why you should consider refinancing your mortgage loan. If you find the costs of refinancing overwhelming, don’t panic. There are a lot of other options. Talk to your loan officer, and they will help you find the best option.
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Disclaimer: The views and opinions of Eric Lawrence Frazier are his own and do not necessarily represent First Bank or any organization affiliated with Eric Lawrence Frazier, or the Power Is Now Media Inc. First Bank is an Equal Credit Opportunity Lender. Eric Lawrence Frazier, MBA, is also a Vice President and Mortgage Advisor with First Bank. NMLS#461807 and a California Licensed Real Estate Broker DRE# 01143482. Email: Eric.firstname.lastname@example.org. Ph: 714- 475-8629.
Eric Lawrence Frazier MBA
President and CEO
The Power Is Now Media Inc