‘Tis the holiday season and while you are in the spirit of giving gifts, why not gift yourself with a refinance? I know, I know. Refinancing your home loan hardly sounds like a gift. I’ll get to that in a minute. But first, if you’re thinking your rate is already too low to benefit from a refinance, you’re not alone.
Most people think that refinancing is only beneficial if they can lower their existing interest rate by some randomly assigned margin, usually 1 or 2 percent. I have a chuckle when I hear this because it’s mostly baseless. Different situations and different financial goals provide too many opportunities to list that are usually missed by only focusing on a new rate.
Here are a few situations that could substantially benefit from refinancing:
- Accessing equity to do home improvements
- Combining two or more liens on a property
- Consolidating unsecured debt
- Reducing loan terms
- Satisfying divorce and property settlement agreements
- Accessing equity for college expenses instead of accumulating student loan debt
When rates are at near-record lows, people typically blindly refinance often just resetting existing loans back to their original amortization periods for lower monthly payments. But when rates are rising, and we’ve seen them rise recently, you should seek deeper analysis of your particular situation to understand the benefits that still exist, even if a new rate isn’t 1 or 2 percent lower than what you currently have.
Our clients ask us every day about the rising rates and the timing of their purchases and refinances. Who really knows how the financial markets will react when the new President-elect is inaugurated in January? I’ve told my clients that despite the recent uptick, rates are still incredibly low. And it might be risky to apply the “wait and see” approach when making a financial decision like refinancing. Uncertainty and predictable interest rates rarely go hand in hand.
Let’s get back to how refinancing can be a gift to yourself. Timing is an important factor here, but people who close a refinance loan early in a month will have 45 to 60 days before they have to make a mortgage payment. For example, if you closed your refinance loan in early January, you would make your next mortgage payment on March 1. This often helps recoup a significant amount of money spent during the holidays.
If you’re like most people, you’d like to spend zero time figuring out if a refinance loan would benefit you. Let’s face it: It’s a lot of math, and you’ve got holiday shopping to do. Fortunately, I’m one of those unusual people who actually loves figuring out if a refinance loan would benefit you. My clients simply tell me their specific life situations and financial goals, and I provide an in-depth analysis and personal consultation at no charge. If you’d like to gift yourself this holiday season, give me a call this week while there is still time to close in early January. And then get back to your shopping!
This weekly Sponsored Column is written by Mike Miles of Fountain Mortgage. Located in Prairie Village, Fountain Mortgage is dedicated to educating, and thus empowering, clients to make the best financial decision possible for their situation. Contact Fountain today.
Mike Miles NMLS ID: 265927; Fountain Mortgage NMLS: 1138268