This ARTICLE On Net Tangible Benefits By Refinancing By Homeowners Was PUBLISHED On September 25th, 2019
Mortgage rates are at a 3-year low. Experts are anticipating mortgage rates to go lower in the coming weeks and months:
- The Federal Reserve Board (The Fed) has recently lowered interest rates by 25 basis points
- This was the first time the Fed has cut interest rates since 2008
- Most borrowers who closed on their home purchase loans last year can get net tangible benefits by refinancing their home loans
- Most borrowers closed their home loans in 2018 with rates in the upper 4.0% to over 5.0%
- Today’s mortgage rates are under 4.0%
- In order to refinance, lenders require borrowers to get net tangible benefits by refinancing
In this article, we will cover and discuss the Net Tangible Benefits By Refinancing By Homeowners. There are several net tangible benefits borrowers can get by refinancing their home loans.
The Most Common Reason Homeowners Refinance Their Home Mortgages
There are many reasons why homeowners may need to refinance.
- It may be due to a divorce
- The ex-spouse may want his or her name off the mortgage note and tile of the property
- It may be due to co-borrowers needing to get out as borrowers
- It may be for needed cash for repairs and/or other family emergencies
- It may be for eliminating FHA MIP and refinancing the loan to a conventional loan
- However, the most common reason homeowners refinance is due to get a better mortgage rate
Lower mortgage rates mean lower monthly payments which mean tens of thousands in savings over the course of the loan term.
The Top Reason To Refinance
The top reason homeowners refinance is to lower their monthly payments.
- Rate and term refinances account for over 50% of the refinance transactions in the United States
- By refinancing a current home loan to a new loan with a lower interest rate, not only does it lower the monthly mortgage payment but homeowners can save tens of thousands of dollars over the course of the loan
- If the borrower has a higher credit score and equity in their home since they first close on their mortgage, this means much lower rates and terms
Alex Carlucci, the top refinance loan officer at Gustan Cho Associates says the following:
With a lower interest rate, you can get lower monthly payments as well, particularly if your refinanced mortgage has the same payoff date as your old home loan. You can also lower your monthly mortgage payments by extending your payoff date past what it currently is, so you’re paying less in principle each month. If you currently have an ARM (adjustable-rate mortgage), you may choose to refinance to a fixed-rate loan to lock in your rate for the remainder of your mortgage. That way, you don’t have to worry about your monthly payments increasing if rates should rise. Many borrowers start out with a 30-year home loan, then refinance to a 15-year fixed-rate mortgage after a few years. This allows them to pay the mortgage off faster and save a lot of money in interest over the life of the loan. Mortgage rates on 15-year loans are also significantly lower than on 30-year mortgages, so you may be able to shorten your term without a big increase in your monthly mortgage payment.
FHA and VA have the fast track streamline refinance loan programs. Streamlines is a fast track refinance mortgage program where it does not require income docs nor a home appraisal. Most streamlines can be done in two to three weeks.
Cash-Out Refinance To Consolidate Debts And Combining Two Mortgages Into One
Mortgage rates are at a 3-year low and seem like it’s going to go lower in the coming weeks and months.
- Home prices have been increasing for the past several years
- Many homeowners who purchased homes in the past few years are getting rewarded with equity in their homes
- Cash-out refinances are becoming increasingly popular. Homeowners with equity can do a cash-out refinance
- The proceeds of a cash-out refinance are non-taxable
Homeowners can borrower against their home equity and do the following:
- Consolidate debts
- Pay off high payment car loans
- Pay off high-interest credit cards
- Consolidate two mortgages into one such as paying off a second mortgage
Here is what Michael Gracz, the National Sales Manager of Gustan Cho Associates says about cash-out refinance mortgages:
Interest paid on mortgages and home equity loans is also tax-deductible, up to certain limits, whereas interest paid on other debts usually is not. Couples can deduct the interest paid on up to $100,000 obtained through a cash-out refinance for debt consolidation; for single persons, the limit is $50,000. You can also combine a second mortgage or HELOC (home equity line of credit) into a single primary mortgage at a lower rate. This is like a cash-out refinance, but because you’re using it to pay off secondary mortgages, you’re not reducing your home equity, other than for any closing costs you might roll into the loan. You also get the convenience of a single monthly payment, instead of two or more.
Lenders do not care what borrowers do with their cash proceeds from a cash-out refinance mortgage.
Other Net Tangible Benefits In Refinancing
Other net tangible benefits in refinancing are the following:
- Refinance FHA Loans to Conventional Mortgages to eliminate the hefty annual FHA MIP for homeowners with at least 20% equity
- Taking out co-borrowers
- Homeowners who are divorcing and needing to take out the ex-spouse from the mortgage note
- Other personal reasons
For more information about this article and/or other mortgage-related topics, please contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at email@example.com.