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Convert your adjustable to a fixed rate
When you bought your home originally or refinanced your home the last time, you most likely predicted that you would be moving prior to the expiration of your initial fixed rate period on your adjustable rate mortgage. Or because the rate was much lower at the time, it made sense to “risk it”. If you are reading this you most likely are planning on staying in your home past your initial fixed period. Depending on the differential and your future plans, it may very well be smart to lock in a fixed rate. Give us a call and we can evaluate what is right for you.
Convert to an interest only for better cash flow
Interest only loans come in all different shapes and sizes. The one thing they have in common is that you are not obligated to pay anything toward the principal balance of your mortgage, only the interest due that month. This can be beneficial if it is utilized for the right reasons. For example, if you are not currently maximizing your contribution towards a company sponsored 401K program and would like to increase your monthly contribution, then converting to an interest only loan might make sense. This is a complicated decision that should be thought through with care taking into consideration the types of interest only loans that are available.
Eliminate PMI
Private mortgage insurance or PMI costs consumers millions of dollars annually and, because of the time it takes to pay down the principal balance of a mortgage consumers continue to pay PMI for years after they initially acquired the property. But this doesn't have to be the case.
Housing has appreciated dramatically in Atlanta over the past five years. The Loan to Value Ratio (LTV) determines PMI rates at the time you purchase or refinance. Take your current loan balance divided by the current value of your home to determine your LTV Ratio.
If your home has appreciated to support a LTV Ratio below 80%, the monthly PMI cost can be eliminated. But even if your LTV is not below 80%, chances are good your monthly cost can be reduced. Consider the following example:
CURRENT MORTGAGE BALANCE
|
CURRENT MARKET VALUE |
LOAN TO VALUE |
ESTIMATED
PMI |
RATE ESTIMATED MONTHLY PMI
COST |
$200,000 |
$235,000 |
85% |
.0032 |
$62 |
$200,000 |
$223,000 |
90% |
.0052 |
$96 |
$200,000 |
$210,000 |
95% |
. 0078 |
$136 |
In this example, if we can get the value of your house under 80% LTV we would save you a minimum of $62 or as much as $136.
At Family Mortgage we can provide you with Free Comparable Sales for you neighborhood to help you get an idea how your particular area has appreciated over the past few years and whether or not PMI can be eliminated.
Lower your rate and payment
If rates are declining, it may make sense to considering refinancing to lower your rate and monthly payment. Or conversely, you may have taken out a loan initially at a higher rate because of credit issues or because you didn’t have adequate income at the time. If this is the case and you have solved the initial challenge, it may be time to refinance and grab a lower rate. Always ask us about whether it makes sense to do a No Closing Cost Refinance.
Shorten your loan term to build equity faster
Many borrowers use a refinance to shorten the term of the mortgage. But brace yourself. Even with the interest rate being slightly better (lower) the monthly payment will jump fairly dramatically going from a 30 year to a 15 year mortgage. The benefit is that you will pay substantially less in interest over the life of the loan and you will build equity much quicker. Try our calculators to get an idea of the payment differential
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