Why Now Is the Perfect Time for a Mortgage Refinance

The COVID-19 pandemic's impact on the global economy has been staggering. However, while many aspects have been damaging to businesses and individuals alike, the work done by the federal government to stymie the worst impact of the coronavirus has actually served to help homeowners who are looking to save money on their real estate investments.

With historically low-interest rates, the time is ripe for many homeowners to consider refinancing. For those who may be on the fence about whether or not refinancing is right for them, the Federal Housing Finance Agency (FHFA) recently announced that Enterprises (Fannie Mae and Freddie Mac) will now be removing the fee for loan deliveries as of August 1, 2021.

Known as the Adverse Market Refinance Fee, this fee originally existed to help lenders cover losses projected to occur due to the COVID-19 pandemic. However, with the economy rebounding, many lenders no longer fear the potential of losses - and have made it easier than ever to refinance while interest rates are still incredibly low.

Not sure if refinancing is right for you and your family? Sometimes, the more you know, the more confident you can be in a financial decision. Read on to learn more about the benefits of refinancing - and how you can know if refinancing is right for you!

What is Refinancing?

Refinancing is the act of paying off your original home loan and then committing to a new home loan with more favorable interest rates. The new interest rate can lower your monthly payments and reduce the overall cost of your home loan.

You can use the money you save in monthly payments towards other bills or put it into savings for emergencies. Refinancing should only be done if you are sure that you will benefit from better terms on your home loan - which is why working with a licensed and experienced refinancing professional is key.

What are the Benefits of Refinancing?

With today's current market conditions, there are plenty of benefits that come with refinancing. Here are just a few of the top reasons that many choose to refinance their mortgage loan:

Lower monthly payments: If you have been making your current mortgage payment for some time, you most likely already know that this payment is higher than what it would be if you were paying off a new loan. New interest rates are often low, so most refinancing customers find that they can lower their monthly payments by hundreds of dollars or more.

Reduced interest: You will be surprised how much you could save when reducing your interest rates - especially if you are doing a cash-out refinancing where you have equity in the home. By refinancing, your new loan has a shorter term, lower interest rate, and it gives you the chance to diversify your fixed payment.

Get cash out: You can often take a portion of your equity out in cash when you refinance. The amount of money you can receive depends on the type of refinancing package and how much equity there is in the home. 

You can use this money as you like, whether to pay off debts, make home improvements, or anything else.

Stop paying private mortgage insurance (PMI): If you have less than 20 percent equity in the house when refinancing with a cash-out option, most lenders will require you to purchase private mortgage insurance until you have 20 percent equity.

This can cost you hundreds of dollars every month, and it is not required if you have more than 20 percent equity in the home when refinancing.

Fix your interest rate: Many times, homeowners will refinance when they are unhappy with the current market conditions or their credit score has dropped for some reason - both of which have an impact on your interest rate.

You can secure a fixed interest rate with refinancing, so you know how much you will pay every month for the life of the loan without worrying about rising rates.

With so many great benefits to refinancing, the addition of historically low interest rates and the removal of fees related to refinancing can make refinancing look like a lucrative opportunity for many homeowners who are planning to stay in their homes.

5 Signs It May Be Time to Refinance Your Home Loan

Now that you know the benefits of refinancing, you may be wondering when you should start the process of working with a lender.

While the number one reason should be the removal of the Adverse Market Refinance Fee - opening the doors for even more opportunity for homeowners - there are other signals that you can watch for that may make the decision to refinance a bit easier:

Reason 1: Interest rates have fallen significantly since you first purchased your home, and you could benefit from lower repayments.

The COVID-19 pandemic led the Federal Reserve to slash interest rates to historic lows - and so far, they've stayed low. By taking advantage of low rates, you can shorten the length of your home loan and save significant amounts of money in interest payments.

Reason 2: You need more cash for a large purchase or to save for the future.

A lower monthly payment on your new mortgage can free up cash that you can use to fund a large purchase, like a car or business equipment. The amount of equity in your home is determined by the values of your home and the balance on your mortgage. If you have a high rate, it's more challenging to unlock that equity.

Reason 3: Your current financial situation has changed.

If you've recently experienced job loss or divorce, for example, you may need to renegotiate the terms of your home loan. You may want to make your loan more manageable, given your new financial circumstances.

On the other hand, if your income has increased due to a promotion or job change, refinancing to a lower rate can help you save money while giving you the flexibility to pursue other goals.

Reason 4: Your credit score has improved.

If your credit has improved since you took out your original home loan, lenders may offer a better interest rate if you were to refinance. This is a great opportunity to save more money on your monthly repayments.

Reason 5: Your home's value has increased since you first purchased it.

If the market value of your home has risen, then refinancing could help unlock some of that equity to put towards other financial goals or even just pay down current debt.

Ready to Refinance? Contact the Omaha Mortgage Guy Today!

The unique combination of low interest rates and the removal of the Adverse Market Refinance Fee from new loan originations has created the perfect opportunity for homeowners to refinance.

If you want to learn how much lower your monthly payments could be, or if you want to hear how large of a loan you may qualify for, contact the Omaha Mortgage Guy  - Omaha, Nebraska's premier mortgage lender - today!

The time has never been better to explore refinancing your home and securing the benefits that come from it. A member of our team will be happy to walk you through the process and answer any questions that you may have.

Visit us online or call us at (402) 243-0002 for more information. 

Author Bio

Will Foster | First State Bank Mortgage Senior Loan Officer

I became a mortgage lender in 2010, right after the "bubble" popped, and the mortgage industry underwent an incredible transformation. This has given me a unique advantage in the fact that I have never known anything other than the highly-regulated world we now live in.

Throughout my years of experience, my primary goal has been to keep up with the constant changes in the industry so I can help my clients investigate all of their options and maximize savings. In addition, because I specialize in Conventional, FHA, USDA, Jumbo, portfolio, and VA refinances and purchases, I can help a wider variety of individuals, families, and investors identify and secure the right loan to best suit their future interests.

The mortgage process can be a little confusing and even overwhelming these days with all of the regulations.  I guide my clients through the process from start to finish, and I try and make it as painless and hassle-free as possible.