The other day, Get Rich Slowly published 14 Smart Money Moves to Make Before the End of the Year which I liked enough to share on my Facebook page and to also included here on my blog. 🙂 There are a couple “smart money moves” that are missing on this post that I would like to suggest for home owners.
Contact a local licensed mortgage professional review your current mortgage to see if it makes sense to refinance. Mortgage rates are back to very low levels and this could be an opportunity to:
- reduce your monthly mortgage payment;
- reduce the amount of interest you pay over the life of the loan;
- eliminate private mortgage insurance or FHA mortgage insurance (neither are tax deductible);
- eliminate a second mortgage or HELOC;
- convert an adjustable rate mortgage (ARM) to a fixed rate mortgage;
- or do a cash out refi to do improvements on your home or eliminate other debts.
There is no reason to pay more for your home with a higher interest rate as long as you are planning on retaining the mortgage long enough to “break even” on the cost of the refinance. Your mortgage professional should share an amortization schedule of the new mortgage to show when you will return to your existing principal balance and thus “break even”. You can also opt to have the mortgage rate increased, which will create a “rebate credit” that can be used to pay closing costs and prepaids. Ask your mortgage professional to show you different pricing options.
By the way, if you currently have an FHA mortgage, I know many are hanging on to the lower rate when they need to factor the monthly mortgage insurance that may or may not drop off the payments (depending on when the mortgage closed). Please be sure to factor what you are paying in FHA mortgage insurance as an existing cost to your mortgage.
In the greater Seattle area, home values have appreciated making it easier to refinance. We don’t have the same appraisal concerns that we had a couple years ago.
When you refinance, you will receive a refund of your existing reserve account balance from the mortgage servicer (who you make your mortgage payments to) a few weeks after closing. You can use those funds to reduce other debt or to go towards savings. By the way, you do NOT have to go to your mortgage service provider for your refinance – do not assume they will offer you the lowest or best mortgage price.
I highly encourage you to contact a local mortgage professional, preferably one with local in-house underwriting, to have your mortgage reviewed. I am happy to review your mortgage on homes located in Washington state to see if it makes sense to refi now. There are times when the savings may not be enough to justify the cost of the refi… and there is no such thing as a “no cost refi” (you are paying for closing cost either out of pocket, financed into the mortgage by increasing the loan amount or by the rate being increased).
There should be no cost for a mortgage professional to review your current mortgage and/or provide you a written rate quote. If I can help you with your mortgage needs for your refi or home purchase any where in the state of Washington, where I’m licensed, please contact me!
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