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  • Is Now the Time to Refinance Your Home?

    Is Now the Time to Refinance Your Home?

    When is the right time to refinance your home? That can be a tricky question, as the act of refinancing can be time-consuming and you want to make sure you’re getting the best deal. However, the general rule of thumb is that you want to refinance when you can save at least 2% of the interest rate of your current mortgage. Let’s get more into home refinance, what it means, and when you should pull the trigger.

    Remember: if you have specific questions about real estate or home values, you might wish to speak to a professional financial advisor. Everyone’s situation is unique, and while general rules are helpful, you’ll want specific advice when you go to make major moves like refinancing your home.

    Home Refinance

    What is Home Refinance?

    Home refinancing refers to a practice that involves taking out a new mortgage loan to pay off an existing loan. Broadly, this falls under the umbrella of a financial practice called debt consolidation. This might sound a bit odd at first. Why would you take out a loan just to pay off another loan? However, this makes more sense when you look at the benefits you could get. For instance, if you can get your interest rate lower on the new loan than your existing loan, it’s a good idea to refinance.

    Typically, people are going for the lower interest rate. However, there are other reasons to do this. These reasons could include switching from a fixed-rate mortgage to a variable mortgage, or vice versa. One could also make the switch in order to shorten the length of their mortgage.

    Lower Interest Rates

    One of the main reasons people will refinance is to get a lower interest rate. As a general rule, if you can reduce your interest rate by at least 2%, you should do so. In a market with historically low interest rates, you should also consider getting a fixed-rate loan, which will lock in a rate for the duration of the loan. This can give you peace of mind that the loan will remain stable even as the interest rates of the market go up.

    When one gets a lower interest rate on their mortgage, they have two options. First, they could simply opt to have lower monthly payments. This is great for people who might not have a lot of money left over at the end of the month. Another option would be to pay off the loan faster by keeping the payments the same. This is a great option for people who aren’t having any issue meeting all of their bills every month.

    Fixed Rate: The Right Call?

    Should you get a fixed rate loan when you refinance, or should you opt for an adjustable rate? This is a complex question that depends on a number of factors, like the length of the loan and the current interest rates in the market. However, as a general rule, if interest rates are low or your loan is for a longer period, you may wish to get the fixed rate. This locks in the interest rate and gives you peace of mind that you’re not having to keep up with the market’s rates.

    On the flip side, if you loan is longer, or if interest rates are historically high, you may wish to go with an adjustable loan. Adjustable loans change their interest rates based on the market, generally reflecting what you see on the housing market. These allow you to buy-in with a higher interest rate without worrying about getting stuck with it even while rates in the market fall.


  • How Much of a Mortgage Should You Take On?

    How Much of a Mortgage Should You Take On?

    It can be difficult to think critically when it comes to home buying. After all, you want the best money can buy for you and your family. However, that doesn’t mean you should take on a huge mortgage just to get into a slightly bigger house that’s slightly closer to downtown. Today we’re going over some smart rules of thumb to keep in mind when you’re buying a home, and how you can make the most of your home buying budget.

    How Much Home Should You Buy

    First Steps

    The first steps in any purchasing decision need to be taking inventory. Go ahead and look at your current living situation and figure out how much you’re allocating every month to your rent or mortgage. Then, make an honest and clear-eyed budget to get a grasp on where your money goes and how much extra income you might have, if any.

    Once you’ve taken a look at your finances, you can honestly begin thinking about where you want your mortgage payments to be. Get a ceiling for your budget and don’t go over it, no matter how intense of a bidding war gets launched on the property you want. This allows you to think critically when you’re making your purchasing decisions.

    Rule of Thumb

    The old, time-tested rule of thumb when it comes to mortgages is the 28/36 rule. This rule holds that you shouldn’t let your total monthly expenses for housing cost more than 28 percent of your income. It also holds that you shouldn’t let your total debts, including credit card or student loan debts, exceed 36 percent of your income. Putting that together, you get some clear numbers.

    For some hard examples, this means if you make $50,000 per year, you shouldn’t spend more than $1,166 on monthly housing expenses. If you make $60,000, that number is $1,400, for $75,000 that number is $1,750, and if you make $100,000 per year your cap on housing expenses should be $2,333.

    Down Payment

    Make as big of a down payment on the home as you can. The bigger your down payment, the better. A big down payment means that you’ll have a shorter mortgage length, or a smaller mortgage payment. If you have no problem paying down a larger monthly bill, you could consider “paying” yourself more for your current housing expenses in order to make a savings account for your down payment.

    Buyers with a larger down payment available are also more likely to win out in bidding wars over properties. Realtors typically want more cash up-front, even if that means less cash in the long run. Ideally, you’ll want to provide a down payment of at least twenty percent of the mortgage in order to avoid paying mortgage insurance. Paradoxically, this means you’ll save more money by having more money up front.

    Do Your Research

    Make sure you do all the research you need to about the area you’re trying to buy a home in. Work closely with your realtor on this endeavor. It’s important you have an idea as to how much a home in the area should cost, so you don’t fall for any overpriced homes. Consider factors that add to the price, such as pools, garages and proximity to schools and shopping centers.

    When you’re equipped with the knowledge you need you’ll find it much easier to negotiate. You’ll also find it easier to walk away from poor deals, as you’ll know what kind of deals you can get on comparable houses in the region. Remember: your budget is important, and you shouldn’t go above the 28/36 rule, especially when you know you can find a better deal elsewhere.


  • Should You Refinance Your Home?

    Should You Refinance Your Home?

    Refinancing your home’s mortgage can be done for a variety of reasons. In short, refinancing a mortgage means paying off your existing loan balance with a different loan, allowing you to restructure your debt. One of the main reasons people do this is to get their interest rates lower, shorten the length of their mortgage or simply consolidate their debts.

    Is refinancing your home right for you? Well, that’s a complex question. There are a lot of factors that go in to refinancing, including the terms of your current mortgage, your financial situation and your life status. Today we’re going over some of the basic of home refinance.

    Home Refinancing

    What is Refinancing?

    As stated above, refinancing is the practice of getting another loan to pay off your existing mortgage. This can cost between three and six percent of the loan’s principal, involves a title search, appraisal and application fees, and is typically done to give the homeowner some economic advantage.

    Due to the complexity of refinancing, it’s a good idea to take things slow and do a lot of research before refinancing your home. Diving in might not be the wisest course of action. However, there are a number of reasons you might want to refinance, so learning more about the process can be a good long-term well of knowledge.

    Interest Rates

    One of the most common and popular reasons to refinance is to secure a lower interest rate. When interest rates drop, look at your home and compare what you’re paying now to what else is available on the market. If you can save even one percent of interest, it might be worth refinancing. The general rule of thumb, though, holds that you should refinance if you can save two percent or more on your loan.

    This does a few things. Firstly, it means your monthly payments will be lower, which is great. Secondly, it could mean that you can pay off your loan sooner, meaning you get to invest in your home’s equity more quickly.

    Loan Length

    When you refinance to a lower interest rate, you’ve got two choices. You could either choose to keep the loan length the same and pay less every month, or you could pay the same amount and shorten the loan’s duration. That’s a tough choice for some, but it depends on your situation.

    If you’re making your payments comfortably, it might be ideal to take the shortened loan length and pay your home off faster. However, if you’re struggling to make payments every month, consider taking the lowered monthly payments, which will help you stretch your budget on a monthly basis.

    Fixed Rate vs Adjustable Rate

    Another common reason to refinance your home is to change it from a fixed rate mortgage to an adjustable rate mortgage, or vice versa. Often, ARMs begin at lower rates than FRMs, but can become higher over time as their rate is adjusted for inflation and other market changes. Meanwhile, a fixed rate can often start higher but become much more reasonable as time goes on and the market increases around it.

    On the flip side, if you have a FRM, but interest rates are falling, it might be ideal to switch to an ARM. ARMs can be a very good idea for refinance when you’ve got a short amount of time left on a mortgage and interest rates are low in the market.

    Do Your Research

    Make sure you do yourself a favor and do lots of research on interest rates, your mortgage and the market before you refinance. It’s a big leap and can be a very costly endeavor if you’re mistaken about what’s best for your home. When done right, however, refinance can be a huge money saver.