Why you should consider refinancing your mortgage – part 1
Mortgage refinancing is not something people generally get excited about. Perhaps it’s because many people feel a refinance won’t do much for them – ultimately, it’s assumed refinancing will be too much hassle without much of an increase in benefits.
However, you might be surprised if you take a closer look at what refinancing can do for you. Depending on what your financial goals are at the time, refinancing could help when it comes to achieving those goals.
In this three part series, you’ll hear from two people who recently refinanced their mortgages for completely different reasons. This week we’ll hear from Jesse, our Digital Strategist at Blue:
“When my wife and I purchased our house we didn’t have a ton of money on hand, so our down payment was well below the 20% needed to avoid PMI (Private Mortgage Insurance). We also wanted to make sure we could theoretically afford the house on one of our incomes, so we opted to go with a 30 year note vs. a 15 to make sure we had some breathing room. We said we could always just pay it like a 15 and shave several years off the life of the mortgage. That extra cash flow allowed us to aggressively pay down our non-mortgage debt, which has put us in a position to get aggressive with the mortgage now.
Housing prices in our area have been climbing steadily in the four years that we’ve owned our house and we estimate that we should be close to the 80% loan to value needed to get rid of PMI. We were already planning on getting an appraisal to drop PMI and get some more cash freed up to knock out the mortgage within our goal time of 10 years. We had a great rate to start with, 3.5%, so we didn’t really think it would be worth messing with a refinance.
After talking with Jason at the 7th Ave branch over some waffles one morning I asked him what his thoughts were and what he thought rates were going to do. He said that there are indications that they may rise but of course no one really knows, and rates right now are excellent. He mentioned that they’re doing 2.75% on a 15 year. He also mentioned that closing costs are fair on a refinance and he encouraged me to fill out the online application.
I discussed this option with my wife and we dove into the spreadsheets to see where we’d end up. We are planning on getting aggressive with our payments this winter as it is and we wanted to see how much we could save by dropping PMI and our interest rate. Turns out that it was going to save us more money than our closing costs would be even on a 6 year payoff plan, so we decided to pursue it.”
Stay tuned for our next post; we’ll hear from Mindy, Blue’s Marketing Manager, about why she decided to refinance.