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Money…. the topic of good evil and everything in-between. Knowing what to do with your money and major loans is a full task in itself but you may be surprised by some of the rewarding benefits of doing a little investigation. My husband and I have been at a crossroads for the last year…. do we move, do we ride it out, do we refinance?
So we took a closer look at all of our current loans and we had quite a bit. We have a mortgage, two auto loans and a travel trailer loan. All of these added up to some big bucks and all of these played a role in our financial limits. We couldn’t really consider moving because our other debits took a big chunk of our buying power. In fact, auto loans can are one of the biggest roadblock between you and your dream house.
Do you feel this way about your finances?
We would love to remodel and make our home more trendy and inline with what our needs are today rather than when we bought it 15 years ago. But, with all of our money accounted for monthly, it left little room for any improvements. So we sat down and crunched some numbers. We used SavingsCalculator.org to find out what it would look like if we refinanced and pulled out different amounts of equity from our home. We currently had an interest rate of 3.85 on a 15 year loan with 10 years remaining. Through a bit of trial and error with the calculator, we saw what it would look like if we pulled out $20k, $50 and the whole enchilada of $140k. We toyed around with what that would look like at reducing our monthly bills and updating the house.
The next battle was getting preapproved for a loan. Since I have a small business and with covid playing with my income, it made it more difficult to get qualified. If you find yourself in this same situation, you may want to look into self-employed loans. After getting approved, we decided in the long run, refinancing the home for it’s max cash out at a 15 year loan at a rate of 2.5 would save us over a thousand a month. With the cash out, we paid off all existing loans and saved $50 for a home remodel. Plus, as a bonus, now the whole loan is taxable unlike auto loans.
Is refinancing something you should look into?
You may absolutely love your home, but what you may not like is your current mortgage price. This is especially true if you have a mortgage that started out as a fixed rate but then changed to variable after a few years. The ever increasing APR can start to put a strain on your finances. That’s one of the reasons many people opt to refinance. Is refinancing an option for you? Will it save you a large amount of money each month or over the course of your loan? Let’s take a closer look. Click here
For the sake of this article, we are going to say you have a $250,000 mortgage that you paid $25,000 down on that is currently paid down to $200,000 and you have 25 years left. Your current mortgage rate is 3.5% and according to the Wall Street Journal, you can reduce the APR to 2.2-percent. You have $20,000 to pay down on your refinance loan so you’ll only need to borrow $180,000. You have 2% discount points, $1200 in closing, and 0% origination points. If you go with a 30-year loan, your savings over the course of the new loan will be over $20,000. However, if you choose to go to a 20-year loan, the savings would be over $41,000.
You can play around with the calculators at MortgageCalculators.Info to get the exact numbers. However, if you can reduce the cost of your APR, you will save money. Of course, the down payment you can afford will certainly have an effect as well. You will also need to consider the cost of inspection and any repairs that might need to be made before a bank will consider refinancing.
Should I Refinance In A Sellers Market
Since selling is not a great option right now being that we are in a sellers market, according to Fannie Mae. You are better off looking to reduce your monthly payments, save several thousand in interest, or think consolidating your current loans might be a thing for you, you should definitely consider refinancing. Take the time to enter the numbers into the calculator so that you can at least get an idea of what may be possible. It doesn’t cost a thing to research your options. It’s also better to do the research and know what to expect before contacting a bank.
I highly suggest you look into refinancing, especially if your rate is higher than 3.5? Educate yourself so that you can make changes that benefit you and your family.
