When To Refinance Mortgages?

Refinancing your mortgage may be the best option for you, and now may be the time for you to do so. Learn why.

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Almost everyone in America who owns a house today is on a mortgage; this is how common it is for an average American to be on a home loan. If you’ve been approved for a mortgage based on your creditworthiness, you pay off the loan with interest during the time limit assigned.

But there are certain circumstances where people are looking for opportunities to refinance their mortgage loans. Here is what it is.

The Truth about Refinancing your Mortgage

Refinancing your mortgage basically means that you are trading in your old mortgage for a new one, and possibly a new balance and when you do that, your bank or lender pays off the old mortgage with a new one. Refinancing is to trade off the old mortgage with the new one.

Refinancing is done in the hope to obtain a lower interest rate on the deal. For borrowers with a perfect credit history, refinancing can be a good way to convert a variable loan rate to a fixed, and obtain a lower interest rate. Borrowers with less than perfect, or even bad credit, or too much debt, refinancing can be risky.

Benefits of Refinancing Mortgage

There are many reasons why people are willing to go through the process of refinancing, and one of those is obtaining a lower rate of interest. Even a slight decrease can save you hundreds and thousands of accumulated dollars- thus making the deal beneficial for you.

Here are some other benefits of refinancing mortgages:

Lower interest rates: As mentioned, one of the major reasons and benefits for applying to refinance mortgages is to get lower interest rates. This could be because of changing market trends, or maybe you may have improved your credit score over time. This could help you in getting lower interest rates that you weren’t able to get the first time around.

Shorten the term of the loan: You also can refinance into a shorter-term loan to pay it off sooner. For example, you might want to refinance a 30-year home loan into a 15-year home loan that comes with higher monthly payments but a lower interest rate. You’d have the loan paid off in 15 fewer years.

One single loan: One other benefit is having multiple loans consolidated into one single loan by refinancing mortgages. This also makes it easier to keep track of payments, thus there is a low chance of forgetting to pay the loan on time.

Cancel mortgage insurance: If you have lender-paid mortgage insurance, you can refinance once you reach 20 percent equity to eliminate the premium that’s built into your interest rate. The same also applies to certain FHA home loans that require mortgage insurance for the life of the loan.

Should I Refinance my Mortgage: Rule of Thumb

The typical should-I-refinance-my-mortgage rule of thumb is that if you can reduce your current interest rate by 1% or more, it might make sense because of the money you’ll save. Refinancing to a lower interest rate also allows you to build equity in your home more quickly.

But this is rather a traditional approach, and may not settle for you in your own situation. The best way to determine is to run the numbers through an online mortgage calculator.

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Conventional refinance rates and those for home purchases have trended lower in 2020. This is higher than Freddie Mac’s 2.84% weekly average because it factors in low credit and low-down-payment conventional loan closings, which tend to come with higher rates.

When to refinance Mortgages?

The best term to refinance mortgages is when:

  • Current interest rates are at least 1% lower than your existing rate
  • You plan on staying in your home for another 5 years (give or take)
  • You anticipate being approved for the refinance loan

If any of the above conditions set on your situation, you should know it is the best time to refinance.

How to remove a name from Mortgage without Refinancing?

The procedure is, of course, a little complicated. Assuming that the lender and payers both agree to this new arrangement, there are a few ways to have a name removed from the mortgage agreement.

One way of doing so is replacing your current co-borrower with another person who is willing. Having the Mortgage co-signed again will help the mortgage lender give some peace that you at least have another person who will pay back the loan with you. Furthermore, to do this, you will have to contact your lender and ask them if replacing a name from Mortgage is possible.

If neither you nor your co-borrower are living in the home or aren’t using the property any longer, you can think of selling it. You can ask a realtor to help you with the process. Generally, what you will be required to do is calculate the actual value of the property and see how much you still owe on the Mortgage. If the value of the property exceeds the loan, then it is a good idea for you to sell it. You can either sell it through online platforms yourself or have an agent sell it for you.

Best Mortgage Lenders 2020

Here is a list of all the best mortgage lenders in 2020 that allow removing a name from Mortgage without refinancing.

LENDER LOAN AMOUNT LOAN TERM APR RANGE BEST FOR
Discover $35,000–$200,000 10 to 30 years 3.99%–11.99% Low rates
BMO Harris Bank $5,000 and up 5 to 20 years 4.49%–Unspecified Different loan options
KeyBank $25,000–$150,000 5 to 30 years 6.64%–Unspecified Homeowners with limited equity
Spring EQ $25,000–$500,000 Up to 30 years 5.205%–Unspecified Homeowners with average credit
Flagstar Bank $10,000–$500,000 5 to 20 years 5.88%–Unspecified Flexible loan terms
U.S. Bank $15,000–$750,000 Up to 30 years 4.05%–Unspecified Low fees at a national bank
Navy Federal Credit Union $10,000–$500,000 5 to 20 years 4.99%–Unspecified Service members
Frost $2,000 and up 7 to 20 years 4.49%–5.64% Low fees at a regional bank
Connexus Credit Union $5,000 and up 5 to 20 years 4.482%–Unspecified Branch network
Regions Bank $10,000–$250,000 7, 10, or 15 years 3.25%–11.625% Customer experience

Note: Sample rates have been extracted online, courtesy of BankRate.

Conclusion

Refinancing mortgages means to replace the old mortgage loan with a new one, and while this may not sound like the best idea, lots of people choose this option. This is mostly because people hope to obtain lower interest rates that they weren’t able to get the first time around, or because changing market trends have made it easier and beneficial to refinance loans.

The best time to refinance mortgages is when the new interest rate that you’re getting is at least 1% lower than what your existing rate is, or if you plan on staying in the house for more than five years.

You can be approved for a refinancing option on the basis of the credit score you may have improved over time. And if that is so, you should totally go in for the option of refinancing your mortgages. The best way is to have a mortgage lender evaluate your situation and shop around for the best rates and easiest ways of evaluation.

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Tony Bennett

Tony Bennett

Tony Benett makes his living in the insurance industry by teaching and consulting. He is also recognized by the legal profession as an expert on insurance coverages. His insurance experience includes having worked at the company level, owned an independent general agency and having worked for an insurance association. He has received various certificates over the past few years and helps his clients and readers by giving them a realistic outlook on what they can expect to achieve within their set targets. At Insurance Noon, he is known for his in-depth analysis and attention to details with accuracy. He has been published as one of the most referred agents by his peers in the insurance community. Tony loves the outdoors and most sport events. His passion other than providing excellent advice is playing golf.

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