When, Why, and If Refinancing is Right for You

Are you stuck with high mortgage rates after the 2007 housing crisis? We have good news: right now is the ideal time to refinance your home loan.

Rates are at a historic low, and a one point decrease in your interest rate can save you thousands of dollars over the life of a loan.  But you need to act quickly, because all signs indicate that rates will start rising again soon.

We know how it is, your obligations change. And your obligations are different than they were when you first signed your mortgage agreement.  Your family is growing. You need to ramp up your retirement savings. And before you know it you’ll be paying college tuition.

Regardless of what you need to save money for, refinancing can help you save up to hundreds of dollars a month.. Over the life of the loan, many homeowners will save themselves over 50,000$ (or even $100,000) by refinancing their loans.

Personal finance and wealth is a marathon, not a sprint. And if you want to reap the benefits of your money later on in life, you can start by financing now.  What could you do with that much extra money in your pocket?

If you’ve been diligent about your mortgages and bills, don’t you think it’s time you got rewarded?

When Should I Refinance?

Interest rates have dropped. Homes are more valuable than they’ve been in years. Now is the ideal time to consider refinancing.

Before you consider getting a loan, you need to ask yourself one question: “What do I want to get out of my refinancing?” These are the most popular reasons to refinance:

  • You want to save money on your monthly payments.
  • You want to get cash from your home.
  • You want to make good use of your equity.
  • You want to consolidate your debt.

These are all good reasons to consider refinancing your home loan. The important thing is that you’re clear about why you want to do it. This will help you decide if now is the time, and find the very ideal option for you.

And when you know what you want out of your refinancing, understand why now is the ideal time to consider refinancing.

After the market crash in 2008, it became hard to get a mortgage. The bank requirements for refinancing became reserved for the uber-rich. It doesn’t matter who you were and whether you owned a home or not, you felt the effects of the crash in some way.

The market is being repaired though. And your home is worth more now that it was eight years ago. And eight years ago, many would-be refinancers we’re denied from the bank, but not anymore. The more valuable your home, the easier it is to get a loan.

Is Now the Right Time For You?

There are three times when refinancing makes the most sense:

1. Market interest rates have dropped drastically.

This is the most common time to refinance. It becomes easy to save money on your monthly payments. Or if you can, continue to pay the same amount and pay your loan off quicker

2. Your home is gaining value quickly.

When the value of your home is higher than it was when you purchased it, you can take advantage of that increased equity. This can help you make big purchases or pay of large debt. Many newlywed first-time homeowners use increased equity to pay off their wedding debt!

3. You’ve only been in your home for a few years.

When you first own your home, most of your payments go toward interest. When you pass the point of paying mostly principal, it’s probably not a good idea to refinance.

That point is really important!

Refinancing may not be the ideal solution for you. But that’s okay. It’s not important that you refinance, it’s important that you get in touch with an honest and qualified lender and figure out what is ideal for you.

The Reasons To Refinance (That You’re Unsure About)

Maybe you’re trying to put your own spin on your home with a remodel project. Or, just starting saving some cash. Those are often the most popular reasons to refinance a home.

But they aren’t the only reasons:

  • Switching from an adjustable rate mortgage to a fixed rate. Many adjustable rate loans seem appealing to homebuyers because their rates can start significantly lower than fixed-rate loans. But this rarely stays so sweet.  The rates of these ARM (adjustable-rate mortgages) tend to rise significantly and quickly later in the loan’s life. It can be very beneficial to refinance to a fixed-rate before this rise happens.
  • You need to pay for college tuition. Let’s face it, college costs aren’t going to go down. In fact, in 10 years the cost of going to college for one year raised an average of 34% in the United States. If you’re a parent who wants the ideal for your babies, this may come as a big financial burden. And, full-ride scholarships are harder and harder to come by. If you need to pay for a child’s education, refinancing to tap into your equity is a great option.
  • You want to start a business. The hardest part of starting a business is getting the money. You have to have money before you begin, and business loans have (almost) criminal interest rates. Refinancing your home can get you the cash you need from equity so you can skip the business loan.
  • You want to pay for a once-in-a-lifetime experience. People will tell you that you shouldn’t spend your hard earned savings on traveling the world. Or maybe people will tell you that you it’s not the right time to get married if you can’t afford the wedding. But you probably can afford these life-changing experiences if you refinance your home for equity. These events may change your life forever, so it’s worth exploring.

The Right Refinancing Option for You

There are a lot of refinancing options. And that can be pretty overwhelming if you aren’t a financial expert.

The most important aspect of refinancing is that you find the option that is right for you. Your needs are specific to you, and not the same as anyone else’s.

Your financing options include:

  • Adjustable Rate Mortgages (ARM). This option is not for everyone. In fact, in many situations, there are serious disadvantages to an ARM. The biggest problem is that these loans start out with low rates but these rates can increase quickly after a few years. But there’s a time and place for everything, including ARMs. Are you planning on moving soon or refinancing again? Then this could be the ideal way to take advantage of low rates.
  • Fixed Rate Mortgages. This is the most common option for refinancing, and with good reason. A fixed rate mortgage never changes, and you won’t get blindsided with the rapidly increasing rates of an adjustable rate mortgage. This is probably the option that’s ideal for you because of today’s historic low rates. Rates might not be this low again in your loan’s lifetime.
  • FHA Cash Out Financing. FHA refinancing is probably ideal for you if you’re looking to pay for something big like remodeling, college tuition, or even a big wedding. FHA cash out is ideal because there aren’t limitations on what you can spend the cash on.
  • FHA Streamline Financing. This is the quickest and most painless way to reduce your interest rate. If don’t want to waste your time with mountains of paperwork, this is probably your ideal choice.
  • HARP Refinancing. This can be a great option if you’ve been denied loans in the past, but  this opportunity expires soon. If you’re interested call us straight away. The HARP program was made to help homeowners who’ve seen their house lose value. That can be painful, but it doesn’t have to be devastating. If you’ve made an honest effort to pay your bills but are going through some hard times, this program can save you a lot of stress.
  • Conventional Refinancing. This is similar to the FHA refinancing. It’s a common way to save money on your monthly payments. The question is which one is better for you.

Refinancing can be scary. It’s hard to understand all the options. But you don’t have to understand them on your own. That’s why working with an honest lender can help you figure it out. The ideal thing you can do for yourself is contact an honest lending agent that can help you swim through the nuances of the different loan types and figure out which one is right for you.

Finding the Right Lender

Being denied by lenders is tough. Getting a home loan is no small feat. All the planning and researching and budgeting is hard, and it can knock you back if you aren’t accepted right away.

And you aren’t a list of facts and statistics. It isn’t fair that a lender looked at a list of numbers and decided that you aren’t allowed to own a home, without ever meeting you or knowing you. Times change and situations change, and a reliable lender like Fellowship Home Loans can see this and do our duty to help the community.

You aren’t a statistic or a list of numbers. If you make an honest effort to pay your bills, and you have a good income, why should you be punished? You shouldn’t.

We look at people for what they are – people. If you dream of owning a home, don’t give up because you were rejected in the past. We want to help, and we can help.

We aren’t going to take your money. If you want to refinance and we don’t believe it’s the ideal time for you – we’ll tell you. Even if that means we don’t make more money. Your life isn’t a game, and it’s our job to make sure everyone is in their ideal financial situation.

And when refinancing is the right thing to do – or getting a mortgage – we will do everything we can to make sure you get your home, or lower rates, or whatever makes the most sense for you.

“…‘Love your neighbor as yourself.’ There is no commandment greater than these.” (Mark 12:31) The purpose of business is to serve your neighbor and your community. We will do everything in our power to serve you best. You deserve that.

Get a personalized loan consult with one of our experts today.