FinancesReal Estate

Should I Refinance My Home?

Should I Refinance My Home?

It’s been a little bit since I have written a post, but all for good reason. I took some time to finally finish my real estate license course and am now waiting on my certificate. Once I get that, I can take my real estate license examination. I’m pretty excited to continue this journey.

As the title of this post shows, the question is, should you refinance your home. Being that I recently refinanced my home at the end of March, it wouldn’t be a good move for me. However, percentage rates have dropped another half percent from when I refinanced!

When I refinanced my home in March, I was able to lock in a 2.75% rate and get a $10,000 credit to close. I lowered my mortgage payment by almost $400 a month! Now that rates are 2.25%, I could have saved an additional $200+ a month, but that’s ok.

There are many different reasons you may want to refinance your home…

  • It could be to pull out some equity to pay off debt or invest in more real estate.
    • With this option, you would pull equity out to pay off any high-interest credit cards or loans.
    • You could also take this equity to use as a down payment on an investment property.
  • Maybe you want to lower your monthly mortgage payment (my reason for refinancing).
    • Lowering your interest rate can save you a lot of money over the life of the loan. Depending on your goals, you can continue paying your old payment and build equity faster in your home. You can even pay off your home faster this way.
    • Another thing you can do is invest the money that you are saving on your monthly mortgage payment
  • You could refinance to pay off your home faster (moving from a 30-year to a 15-year mortgage).
    • Dropping from a 30-year to 15-year mortgage can get you an even lower interest rate, but your monthly payment will most likely be higher.
  • You may even have an adjustable-rate mortgage and you are changing it to a fixed-rate mortgage.
    • Adjustable-rate mortgages can be very risky. You may start at a lower rate than everyone else, but then in 5, 7, or 10 years, your rate can readjust to the current rate.
    • With rates this low, refinancing out of an ARM can be a safer move to make.

Whatever your reason, now is a good time to consider refinancing.

According to this Forbes article, the Federal Reserve is expecting the economy to contract 6.5% this year and will keep interest rates near 0% until 2022. With the rates staying this low, the opportunity to refinance may last for a while. Something to keep in mind is what happened back in March when so many of us refinanced. Many lenders have stepped up their requirements to qualify for a loan. For example, back in April, this CNBC article shows that JP Morgan Chase raised their credit score requirement from 640 to 700.

With all of the different ways to refinance, you should research which options work best for you. Refinancing might not even be an option for you at this time. However, if you are considering it, we recommend that you speak with a professional. A loan broker may be a good option as they can look at many lenders at once to find you the best rate. Hopefully, this article provides something to thought-provoking for you to consider.

Mike Cavaggioni
Mike Cavaggioni

Mike Cavaggioni is an Active Duty Officer in the U.S. Navy, Real Estate Agent, and Real Estate Investor located in Honolulu, HI. He is the founder of Average Joe Finances and host of the Average Joe Finances Podcast. He is the CEO and founder of Compass REI Properties, LLC; a rental property company in Virginia. Mike owns real estate in Hawaii and Virginia and is building a community for people to come together to learn and build their wealth.

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