Refinancing is Still An Opportunity for Homeowners

Refinancing is still an opportunity for many homeowners. 

With the fluctuations in the market, many homeowners can refinance and why now may be the perfect time.

Back in the day, you would hear, “just refinance when it’s 1pt less than your original rate”. But thinking about how to take advantage of the opportunities available to refinance, as they are real.

If you have a Variable Rate loan or an Adjustable-Rate Mortgage (ARM), your rate may increase when the Federal Reserve increases their rates, as these types of loans typically reset annually.

Another thing to consider is the fact that home values have increased approximately 20% in the last twelve months, according to Zillow. The fact that your home has increased in value, you can most likely remove PMI aka Private Mortgage Insurance as you most likely have 20% of the value of your home with a new appraisal for a conventional mortgage.

Those that have FHA loans the MIP, aka mortgage insurance premium is for the life of the loan if you don’t put 10% down. Even if you hit or exceed the 20% you continue to pay this premium. These are the folks who should consider moving to a conventional mortgage. You will have the 20% down, and eliminate the expense of the MIP, which adds up over time.

With the increased home values, you can also do a refinance to cash out home equity. You have things you want to do with your home, and this really allows you to get your home to work for you. Even if it is paying for college or that amazing wedding or a vacation home. While many use this opportunity to pay off high variable interest credit cards, and this is access to cash that is available now in your home. Some call it - tappable equity.

Bear in mind, if you were to consider a home equity line of credit, those are lines of credit they typically have adjustable rates, and go to rates in the double digits, some have prepayment penalties and charges to originate.

Some folks who originated their loans years ago, can still refinance to a lower rate, as rates may not be as low as they were last year, they are still low in comparison to years. Take a look at this chart from Freddie Mac. Keep in mind that their information only goes back to the 1970s.