Homeownership Guidance, Advice and Blogs

As the Director of Affiliate Relations at HomeFree-USA, I’ve always been fascinated with how people handle their money. Like everyone else, I’ve had my financial ups and downs. In fact, it took me 32 months to pay off $32,000 in credit card bills and build up a six-month emergency fund. While that was a very difficult period, I am grateful – and wiser -- for the experience.

Through my personal experiences and working at HomeFree-USA, I’ve gained a ton of insight that I feel compelled to share. You’ll find those lessons here. Feel free to take the thoughts and ideas that resonate with you most and put aside the rest for later. I look forward to sharing my journey.

Wondering if You Should Refinance? Here’s How to Tell

Mortgage rates are low so you may be thinking now’s a great time to refinance. The truth of the matter is refinancing may not be the best option for everyone. Read on to see if it’s the best option for you.

With interest rates low, you may think refinancing is a great way to save money on your mortgage loan. While that may be true, refinancing isn’t the best idea for everyone. Here are three things to consider to see if it makes sense for you.

Come up with your "why"

If you’re going to refinance, make sure you have a good reason. In other words, you should have an ultimate goal. For example you may want to lower your monthly mortgage payment thanks to a lower interest rate. Or perhaps you want to shorten your loan period from 30 years to 15. Another reason to refinance is to switch from having an adjustable-rate mortgage that can fluctuate as interest rates rise or fall to a fixed-rate mortgage that will ensure that you keep the same payment over time. If you can’t come up with the reason you want to refinance, this might not be the time to do it.

Determine if it’s worth the cost.

As tempting as it may be to refinance, refinancing is not free. Closing costs on the loan can easily run as much as 4% to 5% of the loan’s value. You want to make sure you’ll come out ahead over time.
One way to do that is to calculate how much you’d spend in closing costs and compare it to how much you’d save on your mortgage each month. For example, if you would save $250 per month and your closing costs were $4,000, it would take you 16 months to break even and if you stay in your house longer than that, the refinance would save you money in the long run.

Consider the cons.

No matter how good an option sounds, there are always some drawbacks. The same holds true when you refinance. If you’re thinking about taking cash out when you refinance, remember you will be using up some of your home’s equity. Sometimes that can be a good move, such as if you’re making home improvements that will add value to your house. But other times, it can be risky. For example, always think twice before using your house’s equity to pay off credit card bills. After all, if you can’t pay your credit card bills your credit will take a hit but if you can’t pay your mortgage, you could lose your house. Also remember that refinancing could add more years to your loan, making it take even longer for you to pay your home off.

If you’re still wondering if refinancing sounds like a good option, reach out to a HomeFree-USA homeownership advisor today.