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Refinance, HELOC, Home Equity, Home Ownership

Interest Rates are Rising – Is it Too Late to Refinance?

What You'll Learn: Why Refinancing Now Might Be the Best Choice for What You Want to Accomplish

EXPECTED READ TIME: 6 MINUTES

On the mind of many homeowners is the fact that interest rates are rising. However, since rates have stayed low for several years, it shouldn't be a surprise. But, keep in mind – although rates will increase, it won’t be all of a sudden. You shouldn’t see a significant increase overnight. Rates will creep up little by little, so you’ll have a warning. Keep that in mind. And since you might have quite a bit of equity with home prices skyrocketing, you may consider refinancing and taking cash-out for certain circumstances. In addition, there could be other reasons to refinance now rather than later. Here are some top reasons refinancing could be the right choice.

Get Another Borrower off Your Mortgage

Life never stays the same, and that’s true for many things, including going into a partnership and buying a home with another borrower or getting married and purchasing a home together. People part ways, but both still own the house. One solution is to sell the property and split the proceeds. The other solution is for one party to buy the other out. In that case, a cash-out could give you the money you need so you can be the only borrower on the loan.

Good Deals Are Still Out There

Just because rates are increasing, you might still be able to find a good deal if you shop around. Especially if you shop with credit unions as they usually have lower rates. Plus sometimes, lenders offer incentives like lower costs which make refinancing more appealing. VA rates are generally low, so it’s always good to see what rate you can get.

Improved Credit

Even though rates could be going up, your credit score may have increased since you originally got your home loan. In that case, it’s wise to check out your options. Contact your trusted lender and have them look at your credit and let you know what kind of a rate you could get. You may be surprised.

Eliminate Mortgage Insurance & Save

If you’re like many first-time homebuyers – your first home loan was an FHA government-backed mortgage. These are outstanding loans for those with limited funds or credit challenges. And although their rates are reasonable, there’s also the added expense of a mortgage insurance premium (MIP). And that can add $100 or more per month to your payment. If you get rid of MIP, by refinancing into a conventional loan – you could save. It’s worth seeing what you can qualify for and if refinancing into a conventional loan is worth it.

Buy-Down Your Rate

If you want to refinance, but the rate is just a little too high, consider “buying down” the rate. Here’s how it works – you prepay some interest, and your lender gives you a lower rate in exchange. Sometimes it’s a good idea, but sometimes it’s not. You just have to run the numbers to see.

Cash-Out Refi for a Vacation Home

If having your own family vacation home is a dream, depending upon your equity – getting a cash-out refi can give you all or some of the funds you need. Plus, the interest will be lower since it’s on your primary residence. Wouldn’t it be great to know you have a wonderful home away from home to go[SU1]  relax and spend the much-needed time to reset?

Cash-Out Refi to Buy an Investment Property

Purchasing an investment property like a duplex, triplex, or fourplex could be a smart financial move right now. That’s because rents are climbing, and renters are looking for an excellent place to live. Reinvesting your equity in this way can make it grow, plus your tenants are helping you pay your mortgage off.

Cash-Out Refi to Buy Second Home

Some borrowers need a second home. Maybe they work quite a ways away from their current residence and need a place during the week. Purchasing a second home could be a solution that makes your life easier and commute less.

HELOC’S Could Be The Answer

And don’t forget the home equity line of credit. A HELOC is a great financial tool that lets you tap into your equity yet keep your current first mortgage. With a HELOC, you only draw out the money you need. So you’re not paying interest on the funds you haven’t taken.

So just because you hear on the news that rates are rising, don’t discount what you can do with the equity you have in your home and why refinancing may still be the best option in some circumstances.

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