As the rate landscape continues to evolve with the roll-down of Quantitative Easing (QE),we are seeing some emerging trends in the mortgage space. These aren’t new ideas, just ones that have been leveraged less given the low-interest rate environment. As home prices recover in various markets, it’s a good time to take a look at your current equity in your home given its present value. Many of my borrowers have seen enough appreciation to take advantage of lower rates through various programs or consider that dream home. While traditional 30-year rates have edged upward a bit, loans at 15-year, or 20-year terms, have remained more stable. These types of loans offer a way to reach a lower rate and there’s no downside in investigating these programs as a way to reduce your monthly expenses, pull-out cash or pay-off your loan earlier. Another program gaining attention is putting down 25% when buying your next home. This not only helps to reduce the monthly mortgage payment, but can also offer a lower rate than the typical 20% down payment loan.
*Improved equity due to market conditions and/or time in loan
You might be surprised to find, that if you sold your home today, you could see some real upside, i.e. equity. Yet, many of us don’t really want to move (including yours truly) in order to see the benefit of that gain. It’s worth your time to explore this option to see if it might be available to you. Depending upon whether you’re looking for a lower payment, or a reduced loan term, your additional equity could be the answer.
*Two loan programs (First and Second Loans) with higher “Blended Rate”
If you are like many borrowers, you might not have had the full 20% down payment when first purchasing your home and you had to borrow a portion of it. These second loans can have several points higher interest rates and drive up your “Blended Rate.” The Blended Rate is the actual rate you pay on a monthly basis between your first (lower rate) loan and your second (higher rate) loan. If you have had any positive real estate movement in your area, I would recommend evaluating if refinancing into a single, lower rate (vs. Blended Rate) loan could make more sense for you financially.
*You have gains in equity, but your home needs updates
There’s no doubt after 15+ years your home will need some modernization. Whether it’s a new bathroom, kitchen remodel or fresh paint inside and out-refinancing into a new loan program can let you pull out equity to pay for these kinds of projects without taking out a home equity loan or line-of-credit. For many folks toying with a “new build” home, this is a great way to help you fall in love with your home again without having to pay the expenses associated with selling and buying. Even better-no packing!
*You want the loan gone…sooner vs. later
One of my wife’s biggest issues refinancing has always been the “restarting” of the 30-year term countdown. If you are like us, looking down the road to putting our kids through college, there is definite charm in having your mortgage paid off. 15-year loan programs have remained relatively stable during the QE turn-down, making it the best rate option on the market. With increased equity in your home, and lower 15-year rates, it might be time to evaluate if you could make that loan go away.
The take-away from all of this is that it NEVER hurts to evaluate your current loan program to ensure your financial needs are being met. Give me a call, or email to discuss.