Refinancing your mortgage has numerous benefits! Not only can you save money, you can reduce the number of years you borrow money for, and use the equity in your home as cash to pay for various life expenses.

Before diving into the details, let's start with the basics. What does it mean to refinance your mortgage? Refinancing a mortgage is only an option for existing homeowners. Unlike a second mortgage, refinancing does not mean you are required to pay additional monthly payments on your mortgage. On a high level, refinancing simply means you are paying off one mortgage with a new mortgage. 

Why would anyone want to pay off their monthly mortgage with a new mortgage, isn’t that just a hassle? Not exactly. In fact, refinancing your existing loan provides tremendous benefits if the market has moved in your favor. And the current market is prime time to capitalize on refinancing. Consider the following: 

The Interest Rate is in Your Favor

• As mentioned above, the interest rate on loans has hit historic lows. Why does this matter for an existing homeowner? If you’ve purchased your home 5-10+ years ago, you may have a high interest rate. Many of our clients are receiving loans with interest rates as low as 2%. This low interest rate was unheard of in a not-so-distant past. Reducing your interest rate from 4%+ to 2% can save you quite a bit of money per month, and a great deal of money over the life of your mortgage.

The Interest Rate is in Your Favor 

• As mentioned above, the interest rate on loans has hit historic lows. Why does this matter for an existing homeowner? If you’ve purchased your home 5-10+ years ago, you may have a high interest rate. Many of our clients are receiving loans with interest rates as low as 2%. This low interest rate was unheard of in a not-so-distant past. Reducing your interest rate from 4%+ to 2% can save you quite a bit of money per month, and a great deal of money over the life of your mortgage. 

Eliminate Mortgage Insurance 

• Home values have skyrocketed recently. As more and more people leave the city, and no longer commute to an office, people have flocked to homeownership. New home construction cannot keep up with the demand of people purchasing homes, which has caused home prices to accelerate at a rapid rate. If you’ve purchased a home and didn’t put 20% down, chances are you are paying mortgage insurance. However, with the rapid increase in home values, you very likely have more than 20% equity in your home now. Refinancing your home will allow you to capitalize on your home's appreciation, and can help eliminate mortgage insurance from your monthly mortgage payment. What does this mean? More money in your wallet each month!
  
  

Use the Equity as Cash 

• It doesn’t matter if you rent for 1 year, 5 years, or 20 years, you’ll never have the option of building equity when you are a tenant. That story is flipped if you are a homeowner. Homeowners can build equity in the home the moment they’ve closed on the property. The more equity you have in your home, the better! Equity is an asset, and this asset can be tapped into. If you ever wanted to tap into the equity in your home, or use the equity in your home as cash, you can do so via a cash out refinance option.

For example, if you purchased your home 5 years ago for $300,000, you may now owe $270,000 on the mortgage. However, your home may appraise for $425,000. The equity you have in your home is the difference between the appraised value and what you owe, or $155,000 following this example. You can tap into that equity to pay for various life expenses. Perhaps you need a new car, need to pay for your children's education, or want to renovate the house - it doesn’t matter. That money is yours to use. 

Days after refinancing your mortgage, the lender will deposit a lump sum of cash into your bank account. You can effectively use this money however you please. 

Take Years Off Your Mortgage 

• Lower interest rates mean more than just saving you money each month. Lower interest rates can also help you reduce the amount of years you have on your mortgage. For example, if you purchased your home 5 years ago with a 30 year mortgage, you currently have 25 more years before the home is paid off. Depending on your mortgage insurance payment, and the interest rate on your existing loan, you may be able to refinancing into a 20 year mortgage for around the same monthly mortgage amount. This reduces the total amount of lending time by 5 years, which will save you a considerable amount of money in the long run.
  

Another reason why refinancing is such an important option to consider is the fact that refinancing your existing mortgage is super easy to do. Appraisal waivers are becoming increasingly more popular, which simply means the homeowner can avoid needing to have someone come to their home to appraise it. Lenders can get a great understanding of the appraised value of your home by leveraging data, and reviewing recently sold homes in your area. This streamlines the entire process, saves money, and makes it virtually effortless for the homeowner. A seasoned loan officer can navigate the refinancing process with ease, and can help you unlock your savings, or tap into your equity, within a few weeks! 

The real estate and mortgage industry has essentially made an X. Home values increased, while interest rates have declined. One thing is for certain, this phenomenon will not last forever. If you currently own your home, talking to a mortgage officer regarding refinancing options can’t hurt. With that said, you should certainly consider reaching out to get a better understanding of how your existing mortgage stacks up against the mortgage options on the market today. 

Call/Text/Email any time,

Senior Loan Officer

617-620-9175

mikemccarthy@leaderbank.com
Lender NMLS# : 449250

MLO NMLS# : 176640

Boston | Dedham | Marblehead