To Refi or Not to Refi? That Is the Question

There are many reasons you might choose to refinance your home mortgage. Mortgage interest rates have plummeted, and there may be some people who feel like they "missed the boat" on getting a low rate on their home loan. That's where refinancing could come into play.

The following scenarios are for example purposes only. Contact your lender for a personalized discussion around your refinancing options.

  • Tap into home equity to get access to cash.

  • As of Q4 2019, American homeowners had nearly $19 billion in home equity.

- One in four mortgaged homes is considered "equity rich" — 50% or more of the mortgage has been paid off.[1]

  • Individual households gained an average of $7,300 in equity in 2019.[2]

  • Refinance to save money by changing your loan's terms.

  • Shorter term — Go from a 30-year loan to a 15-year loan:

- Pay less interest over time, save $thousands.

  • Longer term — Go from a 15-year loan to a 30-year loan:

- Monthly mortgage payment can drop by hundreds.

  • Eliminate private mortgage insurance (PMI) if you have 20% equity.

  • Roll a piggyback loan into your first loan (they often have higher rates).

  • Switch from an adjustable-rate mortgage (ARM) to a fixed-rate loan or vice-versa:

- ARMs are suitable for people who plan to only stay in their homes a few years, need liquid cash each month, or who expect a boost to their income in the near future

  • You'll get an interest rate at least 1% lower than your current mortgage.

  • Your ARM is about to reset.

  • Your credit score is in the 700s or above.

  • You have at least 20% equity in the home.

  • You have a low DTI ratio.

  • You'll still be in the home when you reach your break-even point.

  1. Add up all the loan fees.

  2. Determine your monthly savings with the new lower payment.

  3. Divide costs by savings to get the number of months until you break even (you start saving more than you spent).

Sources: [1] Attom Data Solutions, "U.S. Homeowners Remain Four Times as Likely to Be Equity-Rich Than Seriously Underwater," May 7, 2020. [2] CoreLogic, Homeowner Equity Insights report, data through Q4 2019.

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