It’s still summer, but it’s never too late for a good spring cleaning. The kids are heading back to school, and fingers crossed, you can use the extra time to get your house organized and your finances in order.
Start here: See how much you can save with 5 mortgage tune-ups
Consider a mortgage refinance to lower your rate, change the length of your loan, and even out your monthly payments. Of course, that all depends on your financial picture, the current mortgage rate, and your goals for the next few years. For specific questions, always check in with your lender.
Refinancing, as the Federal Reserve Board explains, happens when you pay off an existing mortgage and sign on for a new one. Making even one of our suggested changes below can put you back in the driver’s seat if you’re no longer feeling satisfied with your mortgage. Tweaking numbers creates a ripple effect — adjusting your interest rate can adjust your monthly mortgage payment, for example — so that you pay out less each month.
Here are our top five ways to spring-clean your home finances, any time of year:
1. Polish up your payments.
If you agreed to a variable mortgage rate on your first home, you may have seen your loan payments drop and rise. Are you ready for a stable monthly payment, something that you can prepare for? Depending on whether you qualify, you can refinance with a new, fixed rate.
Not sure if you can afford a fixed-rate in the long-term? Talk to your lender first.
2. Dust off the length of your loan.
Life changes as the years go by. Maybe you agreed to a 30-year loan term before you got a new job and a jump in income. Maybe you wanted a 15-year loan term back when you lived in a two-income household, but now you’re not sure if you can make your payments. Talk to your lender about whether a change in loan term will be beneficial to you.
3. Sweep up some cash.
After months or years of payments, you may not realize how much equity you already have in your home. In most cases, it’s not advisable to pull that valuable equity from your home and convert it in to cash. But if you have to pay for your kid’s college fund or pay off a large amount of credit debt, it may be okay to do so.
Check in with your lender on this one. Find out if it’s a smart move for you.
4. Scrub down your interest rate.
How long has it been since you’ve checked in on current rates? You may not realize it, but rates could be much lower than when you originally closed on your loan. That means you could save more money over the length of your loan term if you refinance to a lower rate. Sit down with a lender to see the difference a lower rate could make. Remember: even with a refinance, you will have to pay for closing costs and other fees.
5. Vacuum up your mortgage insurance premium.
If you financed your home without 20 percent down, you may have had to pay for Private Mortgage Insurance (PMI). But if you have been paying off your mortgage for a while now, and you’ve paid off 20 percent of your home, you may not need to pay it anymore. Once your loan-to-value ratio (LTV) reaches 80 percent, you can talk to your lender about removing it. Check in with them to see if you qualify.
The best-practice tip our financial professionals swear by
Tony Robbins might be best known as a self-help guru, but he understands a thing or two about success. He’s also a big endorser of the copycat approach: “If you want to be successful, find someone who has achieved the results you want and copy what they do, and you’ll achieve the same results.”
In life, in business, and especially in finance, it’s all about identifying what works and adopting that strategy. One practice in particular that our in-house loan officers have embraced from day one is scheduling a yearly mortgage checkup — to reassess current financial needs and re-examine the interest rate.
To put it in the words of Tony Robbins, “If your mortgage lender is doing it, so should you.”
Add a check-up to your calendar now so that it’s something you can set aside and forget. Every 12 months, like clockwork and like you would schedule your annual doctor’s appointment, make it a practice to meet with your lender. At this meeting, you’ll be able to review all the changes that may have occurred in your life in the past year — whether that means getting a promotion, having a baby, or sending your kids off to college.
If your mortgage loan type and rate no longer match your lifestyle, it may be time to make a switch. Your mortgage lender can show you how.
How to know when to refinance: Your quick cheat sheet
That’s not to say you can’t get in touch with your lender outside of your annual meeting.
There are a few key times in life when refinancing has big advantages:
- When you’ve had major life changes.
- When you plan to move soon.
- When you see market interest rates change.
- When you’ve improved your credit.
- When you make new financial goals.
- When you need to make a big purchase.
- When you’re changing the purpose of your home, i.e., into an investment property.
- When you need a second mortgage or new line of credit.
Sticking with the yearly rule is going to help, more than you can imagine right now. Maintaining yearly communication with your mortgage lender means that your loan will always be up-to-date. You can trim the fat, reduce unnecessary fees, and potentially lower your interest rate, depending on the state of the market. This is just another way we aim to make homebuying easy — stay in touch, and we’ll help you manage your mortgage.
While refinancing could make a significant difference in the amount you pay each month, there are other costs you should consider. Plus, your finance charges may be higher over the life of the loan.
For educational purposes only. Please contact your qualified professional for specific guidance.
Sources are deemed reliable but not guaranteed.