Being the Holiday Season, many people are trying to figure out how they could get a little extra cash (Maybe you want to take your bride on a Cruise?). Mortgage rates have continued to go lower and, when you refinance your mortgage, you get to skip a mortgage payment! But that’s not really WHY you should refinance – there are programs that allow you to get a lower mortgage payment, with NO appraisal, and there are some REAL REASONS why you might need to refinance:
#1: If you have an equity-line – you should probably get rid of it if you can. Equity Lines allow you to pay interest only. I’ve been a mortgage lender for years, and people “want” to pay the equity-line down, but normally they don’t. In our area, the maximum FHA loan is $295,000.
If you have a 1st mortgage at 4.625%, you might think it doesn’t make sense to refinance with rates in the mid 3s (today) – but if you look at the EQUITY LINE (or second mortgage) you have – then we might be saving you over $500 a month, by combining these two loans into one mortgage. Granted, you will have some mortgage insurance with FHA… but you are paying your second mortgage OFF, and building equity… AND you’re saving money EVERY MONTH!
#2: There was an article in the Wall Street Journal Weekend Edition about the need to pay off your mortgage if you think you might retire one day. Okay, it’s not quite that blunt – but it make the point that if you’re in your 40s, you should be getting a 15 year mortgage.
#3: Owning Real Estate “Isn’t a Get Rich Quick Scheme.” It’s an INVESTMENT – and building equity should be the end goal. If you have a 30 or 40 year mortgage… you can make an extra payment a year to bring your balance down, without refinancing, but MOST PEOPLE do not have the financial discipline to actually DO THAT. If you are one of “those people” – consider refinancing to a 10 or 15 year mortgage! You will save HUNDREDS of THOUSANDS of dollars! (Rates are generally below 3% for these loans right now!)
#4: If you follow Dave Ramsey, you know that Step 6 is “Pay Off your home EARLY.” There’s also a new “Obama” program that allows you to refinance without an appraisal for FHA Loans and VA Loans they are referred to as STREAMLINE refinances – with a Conventional Loan it’s called the HARP program… rates are at RECORD lows!