Low Mortgage Rates Offer Borrowers Plenty of Options

Lower interest rates have historically given homeowners the green light to refinance their homes in order to lower their monthly payments. Even if you think you have a great rate already and won't benefit from refinancing your mortgage, you may be mistaken. There are a multitude of reasons for refinancing your mortgage. Here are just a few:

1. Cash out your home equity

Are you reluctant to move because of the hassle of getting another home? You can cash out your home equity and renovate the home you have. Build an addition, modernize your kitchen, or give your walls a fresh coat of paint. With the right amount of equity in your home, you may even have payments that are comparable to what you had before with a home that feels like new.

2. Remove mortgage insurance

Are you still paying private mortgage insurance (or PMI) on your home because you didn't have 20 percent to put down when you purchased the property? There are two important things to take into consideration when it comes to private mortgage insurance:

1. It doesn't automatically fall off when you get to 80 percent loan-to-value. It automatically falls off at 78 percent loan-to-value. You must write a letter to your servicer to request it be removed at 80 percent. Unfortunately, many homeowners don't realize when they hit that magic 80 percent and pay more than they need to.
2. Mortgage insurance doesn't account for an increase in home value unless you get a new appraisal. With the increase in home values in recent years, one may be paying PMI years longer than they should.

You may even save enough from removing the mortgage insurance to refinance into a lower term to build equity in your home faster.

3. Refinance into a more fitting product

Are you in an FHA loan that requires you to pay a mortgage insurance premium each month? You may have built up enough equity in your home, or enough credit to your name to refinance into a conventional product and get rid of that extra money you pay each month.

Just because a borrower can afford their monthly payment, doesn't mean they shouldn't speak to a mortgage professional. With mortgage rates continuing to stay low, you won't be shifting your savings into a higher interest payment. It's good to be proactive when it comes to one of the biggest assets most people will own. Be strategic in that investment and take advantage of the unexpected rate environment 2019 has given us.

If you need referrals to mortgage lenders for refinancing or contractors to renovate your home, give me a call!

Adapted from David Baker, Premier Mortgage Resources Newsletter Oct 2019