How Can Home Owners Take Advantage of Low Mortgage Interest Rates?
Home values in Colorado are sky high, and mortgage interest rates are close to historic lows. You may be thinking this means nothing to you since you already own a home and have no intentions of selling anytime soon. Well, what if you could take advantage of the equity in your home as well as the low-interest rates? You could if you were to refinance your mortgage.
What Is A Home Refinance?
When you purchased your home, you took out a mortgage. Based on the type of loan you got, your creditworthiness, and other external factors, that mortgage has an interest rate. Mortgage interest rates are a percentage of the mortgage amount that you have to pay the lending institution.
How Does Refinancing A Mortgage Work?
When you do a home refinance, you essentially take out a new mortgage with better terms. This new mortgage will pay off your existing one, so you’ll get to enjoy the benefits of the lower monthly payment. This will free up more cash each month to save, invest, or whatever else you want to spend money on.
To qualify for a home-refinance, you’ll go through a similar process as you did when you bought your home. This will include verifying your income, doing a credit check, and getting a home appraisal. The home refinance process typically takes around 30-45 days.
Types Of Home Refinance
Depending on your situation, there are different types of refinance programs you can take advantage of. One type is called a rate-and-term refinance. With this option, you refinance the exact dollar amount you owe on your existing mortgage but change the terms such as the mortgage interest rates and payback term. With this option, you will have a lower monthly payment since the low mortgage interest rates will equal huge savings, as will the extended repayment terms.
Another type of home refinance is called a cash-out refinance. This option is great for homeowners who need to pay off debt like student loans or credit cards. Not only do you refinance the amount of the mortgage, you also borrow some of your equity. The equity will be deposited into your bank account, and you can use it however you want. In many cases, the low mortgage interest rates will still allow for you to have a lower monthly payment even if you borrow equity. It sounds like a good deal, doesn’t it?
How Much Can A Home Refinance Save Me?
Have you ever looked to see how much of your monthly payment goes to interest? It’s pretty depressing, but you’ll cut a lot of that cost out by doing a home refinance. For example, if you bought a $200,000 house with a 30-year term back when mortgage interest rates were 4.5%, your monthly payment would be around $1,013. Over the life of the loan, you’d end up paying $164,813 in interest. Ouch.
Let’s look at your payment about if you did a home refinance and take advantage of today’s lower mortgage interest rates. As of writing, they’re at 3.375%. That means if you bought that same $200,000 house, your monthly payment would only be $884.
The amount of interest you’d pay over the life of the loan would be about $118,309. Still a ridiculous amount of money, but you would save about $130 each month and $46,500 total.
Want More Information?
If doing a home refinance with today’s lower mortgage interest rates sounds like something you’d be interested in, we’re here to help. We will answer any questions you may have before getting started and walk you through the process. Contact us to get the process started.