With a refinance, you can improve your financial situation and enjoy a bit of breathing room.
Rates are Low
What could you do with an extra $100 a month? If your 30 year mortgage is at over 5%, a refinance at the current rate, which in December 2020 can be as low as 2.625%, could easily get you at least $100 a month if not more.
You can also take cash out to consolidate debt, make improvements or renovations to add to your comfort and the value of your home, or just have a bit of financial breathing room. The year 2020 has been very hard on savings. If you’re still working and have been able to keep your credit rating high, you can put more money in your pocket each month with a refinance to a lower rate.
If you’ve got an adjustable rate mortgage and are concerned about the base rate going up, chances are very good that you’ve got some time.
However, the odds of rates going any lower are pretty slim. Go ahead and convert your ARM to a fixed rate for the same term and skip the worry about it for the foreseeable future.
Short the Terms
If you’re making your payments on time and have a little cash to spare, a refinance from a 30 year to a 15 year will probably not add too much to your mortgage payment.
It will, however, greatly speed up your payoff and the rate at which you target the principal.
When doing this form of refinancing, carefully consider the fees, including appraisal, application, and title search charges that you will have to pay or roll into the new principal and make payments on.
These fees are not terribly onerous, but if you run the numbers, you may find that sending in an extra principal payment twice a year can also shorten the term of your mortgage without all the work to refinance home loan terms or payment.
If you’re a good saver, coming up with an extra payment you can apply directly to the principal twice a year may be easy, but many of us struggle to save some each month and will come up short.
For those who are great at budgeting but great at saving, a refinance really can make the dream of living in a paid-for home a reality.
Tap Into Equity
If you’ve got enough equity in your home to wipe out other debts, pay for education or cars, or make another investment, now is the time to put those dollars to work for you. Many of us work very hard to build up a good credit rating, but then wonder why we bothered.
Yes, it can help us to easily get a loan if we need one or to get lower insurance rates, but good credit is more effective if you can put it to work for you and your family.
Is now the time to start or invest in a small business for you and your family? If you are already making your home payments and can easily continue, then your business doesn’t have to make money right out of the gate.
other valuable tips:
If you can start small, let the business grow, and reinvest the earnings back into it, you could build something for you and yours that can be passed onto the next generation.
You could also use the equity in your home to help a child avoid student loans. For example, if they’re planning to study far from home, check out the housing market there and look into purchasing a duplex or small rental property where your child can live, rent-free, while they go to school. If they find a trustworthy roommate, those funds can be put back into your mortgage.
Getting a lower payment, reducing the terms of your mortgage, and putting equity to work for your future are all good reasons to refinance. Economic growth is about the speed of money. Money has been pretty sluggish during 2020, so lenders are excited to work with you. Check your options.
Image Credit: refinance your home by twenty20.com
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