When is the Right Time to Refinance?
Tips for finding out when you should refinance your mortgage.
if you are asking yourself "when is a good time to refinance your mortgage?" ethan ewing, mortgage expert and president of bills. com, explains when the best time is to refinance a mortgage loan. you can refinance a mortgage loan for lower rates, lower lifetime cost or to get cash out of your home. if you are looking to get a step up on your financial future, you can build a budget, lower expenses, decrease liabilities, get debt free through debt relief or look to lower rates and payments with a refinance loan. check out all of the tools and tips at bills. com, including the free quotes from lenders with all of todays great interest rates click here
"hi, my name is ethan ewing, and i am the president of bills. com. today i wanted to talk about when is the right time to refinance, a lot of people think about refinancing, but you have got to understand when is the right time to refinance. there are three reasons that people refinance, first one is to lower your monthly payment and often your interest rate. the second one is to reduce the term of your loan so you can pay your loan off quicker. and then the third one is to take cash out for home improvements, for a vacation, for education, or to consolidate some debt. okay there are some other reasons as well those are the three big ones.
first one, reduce your monthly payment. you have got to look at what the current market is, what is the interest rate you can get? okay and in order to do that there’s a lot of places you can go online. you can come to bills. com you can get quotes from multiple lenders there. see what the market will give you okay we have some other videos as well on shopping for a mortgage check those out first, understand what the market rate will give you. next, compare that against what your current rate is. look at the payments, the big difference here is what’s your existing payment versus your new payment and look at what that difference is. if it’s $150 dollars a month that you can save, that’s a lot of money. that’s $1,500 $1,800 i’m doing the math wrong. $1,800 a year that you can save, that might be worth it to you. you have to make that decision, is it worth going through the refinance process just to save that much annually okay.
next one, pay off your loan more quickly, really big one here. this is, i consider this a luxury item, if you’re in a position where you can afford higher payments and you want to get rid of your mortgage debt more quickly then look at a 15 year loan. 15 year loans generally run at lower interest rates than 30 year loans. your payments are going to be higher and you are going to pay them off much more quickly and ultimately save on interest in the long run, you are going to be happy. now keep in mind, if you go from a 30 to a 15 there’s no turning back unless you refinance, so you are obligated to make those higher payments. the other alternative to that, is take your 30 year mortgage calculate payments on a 15 amortization, there is a great calculator on bills. com to do that, calculate that payment on a 15 amortization and start making those payments to your lender. make sure on your statements and on your checks to make a note to the lender that “hey i am making this additional principle payment. ” by law they have to do that but it’s always good to remind them okay.
the third reason to get a mortgage, get some cash out. people will ultimately do that for home improvements, for education, sometimes to take a vacation, or to consolidate credit card debt, we have seen that a lot. certainly over the last 5 or 6 years that’s been a big one. now some things to consider, this is a little bit of a slippery slope here. you have to be careful, if you’re going to get cash out for a home improvement, that’s a pretty good idea because there you are putting money back into an asset you have. hopefully you are increasing the value of your house it’s a pretty good move. if you are getting cash out to pay off some credit card debt, i would be a little careful there because basically you are taking some short term debt and converting it into a long term debt, which is your mortgage, so try to be a little careful there. the better thing to do probably is think about how you can reduce that credit card balance by stopping spending so much on the credit card or by making more aggressive payments towards that credit card balance. and then of course there are other things like vacation and some other things that generally people want to take cash out for. so hopefully that helped and we’ll see you next time."