Is it time to refinance your mortgage?
Covid-19 is still wreaking havoc around the world, including in the financial markets. If you are in a position to ride out the storm until sunnier skies arrive, that’s great! On the other hand, now may be a good time to consider refinancing your home to lower your mortgage payments and/or even withdraw some cash. Let’s briefly explore these options to see why it may be beneficial for you.
Interest rates are at all-time lows
Market interest rates have fallen repeatedly in recent months and are hovering at all-time lows, so if you can reduce your mortgage interest rate by even as little as 1.0% to take advantage of the drop, that may be something to seriously consider. If the home you’re in is where you intend to stay for the next five years or more, the reduction in interest will likely cover any closing costs associated with the refinancing.
If you can swing it, converting a higher interest rate 30-year mortgage to a lower rate, or better still to a shorter term mortgage, could produce even greater interest savings for you over the long run.
Use your home equity to protect your credit and keep your expenses current
While it is always risky to use any home equity you may have in your home for miscellaneous expenses, it may make sense given that housing values are still relatively high at this moment in time. Some lenders even offer lower closing costs than a regular mortgage refinance if you qualify, which can make your decision easier. Keep in mind, however, that you will be starting over with a new loan, so plan accordingly if you are approaching retirement or expect reductions in your income in the years ahead that would make it difficult for you to cover the extended future payments.
Eliminate PMI (Private Mortgage Insurance) in the process
One really good consideration to refinance your mortgage is if your home has appreciated to the point that its equity has grown beyond 20% in value, so a new loan could be acquired without PMI which in turn lowers your monthly payment. PMI is put in place to protect the lender not the homeowner, so avoiding paying insurance on behalf of the lender should you default on your mortgage is a worthwhile cause.
As always, F&M Bank is here to assist and support you, so call on us if you have any questions or want to learn more about refinancing your home.
published on 10/7/2020