Top 5 Reasons to Refinance Your Home

Homeowners should consider refinancing their homes if they look to save money on their mortgage or obtain a lower interest rate. There are many reasons people choose to refinance, but the most common ones include paying off debts faster, consolidating debt into one loan with one monthly payment, and unlocking the equity in your home.

Refinancing can also be beneficial for homeowners who want to take advantage of recent changes in tax law by deducting some of the costs associated with refinancing. This blog post will cover 5 reasons why homeowners should consider refinancing their homes.

Save Money on Your Mortgage Interest

One of the biggest benefits of refinancing is that you can save money on your monthly interest rates. Refinancing allows you to get a lower interest rate, which in turn lowers your mortgage payment, allowing you to have more money in your pocket each month. 

Your credit and financial history will be considered when determining if you qualify for a refinance loan and what types of terms and rates are offered. Before applying for refinancing, the homeowner must have all their information together including making sure they don't have any late payments or taxes owed. 

It's also helpful if the homeowner knows how much equity they currently have to discuss options with their lender at the time of application.

Pay Off Debit and Credit Cards Faster

Refinancing your home can help pay off debt more quickly by allowing you to combine multiple debts in to one low monthly payment. 

For example, if the homeowner has a $200,000 mortgage and $10,000 of credit card bills, they can refinance their existing loan and apply any savings towards paying off these debts. 

This is especially beneficial for homeowners who have good credit and stable jobs that will allow them to keep up with payments on their new loans. Suppose the homeowner decides that refinancing isn't right for them. 

In that case, there are other options available, including consolidating your debt into one loan with just one monthly payment or creating a "debt snowball", which allows you to slowly pay off all your debt in order of interest rate.

Uncover Equity in Your Home

Some homeowners are also able to refinance to unlock equity in their homes. This is common for homeowners who have lived in the same house for years and watched home values increase over time. 

To renew their mortgage, these homeowners can use some or all of this equity that has built up over time to help them afford a lower monthly payment without refinancing their entire loan amount. 

Refinancing can be lucrative if you're planning on moving out soon because it may be beneficial to go through the process, even if just for the cash savings alone. Home refinance loan rates are lower than mortgage rates which means you could receive a larger sum of money in your pocket.

Take Advantage of Tax Deductions

Homeowners who have been paying off their current mortgage for years may find that they are in a better position to take advantage of recent changes in tax law that allow you to deduct some of the costs associated with refinancing your home. 

For example, homeowners who have paid off their old mortgage and refinance into a 30-year fixed-rate loan can claim a deduction on any points charged when refinancing. Alternatively, suppose the homeowner has an adjustable-rate or interest-only payment mortgage. 

In that case, they could receive tax deductions for the difference between what is considered "true interest" and what was reported to the borrower's lender by their broker/lender.

Improve Your Credit Score

Homeowners who have good credit will also benefit from refinancing their loans because it allows them to take advantage of lower interest rates, improving their credit score over time. 

A homeowners' FICO score is important when obtaining mortgages, refinancing loans, and applying for other types of financing. Hence, it benefits the homeowner to keep an eye on this number and make improvements along the way. 

If your score isn't as high as it could be, but you feel like you've done everything possible (like making on-time payments), look into refinancing your loan – especially if there is money involved. 

Keep in mind that improving your credit score is a long-term investment that pays off over time.

In conclusion, the housing market is in a state of flux, and many homeowners are looking for ways to make their homes more valuable. 

If you're struggling to make your mortgage payments or think the time has come to trade up, take a look at refinancing your loan. You may discover that it offers benefits you never imagined when you first purchased your home. 

When thinking about changes in the real estate market, it's important to remember that there are also financial benefits available by refinancing a current loan, including lowering monthly costs and improving credit scores over time.

4 Factors in Deciding to Refinance Your Home Before Retirement

As retirement is looming, an idea to refinance your home might be lingering on your mind. You can make the right move using some strategies that will ensure that you remain financially stable. 

Please have a look at the factors that will help you decide whether the idea is viable or not.

Current Interest Rate

If you can lower the current interest rate by 1% or more, mortgage refinancing will be successful. It will make sense since you can pay the loan within a short time. In addition to that, you can build your home’s equity seamlessly with the payment rates. 

If the remaining balance is quite high and you can get a 2-3% reduction on interest, you can go ahead and refinance your home.

Total Refinancing Costs

The cost of refinancing will also play a pivotal role as you make a life-changing decision. Usually, you will cater for closing costs just like you did when you took the initial mortgage. On that account, you have to calculate the expenses to see whether they will favor you or not. 



For example, if you save about $100 per month and the closing costs are $5,000, it will take you roughly 50 months to break even. The need to refinance the loan doesn’t make sense at this point if you intend to move out of your house.

Eligibility

To qualify for the loan, you need to have a stable income and a positive credit score. Therefore, you should look at your financial status to ascertain whether you will get the loan or not. The new underwriting process will dig deep into our cash flow and credit status. It will also look at your home equity concerning the amount that you have.

How Long you will Stay in your home

If you don’t intend to sell the house or move out, there is no need to refinance. It will take many years to clear the debt so that you can start saving again. On that account, you should only take action if you will continue living in your current home. With low-interest rates, you can repay the debt faster and start enjoying the golden years.

Subsequently, refinancing your home is an excellent idea if you can get a lower rate to pay off the loan. Your income, credit score, and home equity play a crucial role as well. Plus, you can benefit from the strategy if you don’t have intentions to sell it.

Does It Make Sense to Refinance Your Home in Your 50s?

There may be many advantages to refinancing a home loan. You could get a lower interest rate or even cash out your equity. 

However, if you are 50 or older, does it make sense to refinance your mortgage when retirement may be just around the corner? 

Can You Lower Your Interest Rate?

According to the experts at Republic State Mortgage Co, most people refinance to lower monthly payments or even shorten the terms of their loan. If you took out your mortgage before the Great Recession of 2008, you should certainly refinance your loan. 

You could save hundreds or even thousands of dollars per month that can be put into your 401k, IRA or other long-term investments. 

Even if you reduce your interest rate by a point or two compared to what it was when you borrowed the money, that point can still represent a significant savings. 

Are You Paying Mortgage Insurance?

A bankruptcy, low income or other circumstances could have put you in a position where you could only qualify for an FHA or similar home loan. 

FHA loans typically require you to pay mortgage insurance, which may add hundreds of dollars to your loan payment each month. If you have sufficient equity, you should refinance and get rid of that burden. 

Will Cashing Out Equity Help Your Financial Situation?

Taking out a second mortgage may help you consolidate credit card or other debt at an interest rate similar to that of your original mortgage. However, losing equity in your home could make it harder to sell if you wanted to downsize in the future. 

Therefore, you should project how much it would cost to pay off other debts under their current repayment terms compared to what it would cost to pay your mortgage for an additional 10, 20 or 30 years.

You Want to Pay Your Loan Before Retirement

Ideally, you will pay off your mortgage before you retire, or have it mostly paid down when you hit retirement age. If you decide to refinance your mortgage, make sure that you don't significantly increase your loan's term. 

Otherwise, you could be using money that you need for health care or other expenses in retirement to pay down a mortgage you could have completely paid off already if you resist the urge to refinance.

Should you refinance your home after you turn 50? That depends on your unique financial situation. However, if you think that refinancing can save money that will be used to fund a retirement account or otherwise help secure your financial future, it may be a strategy worth considering.