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Home Loans from 2013 Refinance to Save money each month

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Photo: Have you refinanced since 2013


The clock may be running out on low mortgage rates

If you’re one of the millions of homeowners who refinanced their home loan a few years ago but haven’t taken advantage of lower mortgage rates in 2017, you may be missing out on a golden opportunity. The Federal Reserve Board, which began tinkering with the federal funds rate in 2015, has signaled that more substantial interest rate hikes may be on the way.

Refinancing your mortgage was once thought to be something that a homeowner only did once or twice during the life of their loan. However, the great recession of 2008 changed that time honored tradition, perhaps forever. As the Federal Reserve lowered interest rates from 2008-2013, a refinancing boom ensued and savvy homeowners took advantage of lower rates and refinanced a number of times — sometimes more than once during a calendar year.

However, now that the refinance boom has subsided to a degree, the media’s focus has turned to the real estate market and whether or not the rally in home buying can sustain itself. Refinancing has become somewhat passe’. Nevertheless, if you’re a homeowner who bought or refinanced your home as recently as 2013, you could be helped by refinancing in a number of ways:

  • Lower your interest rate. Interest rates were roughly .75% higher in 2013 than they are now. In this era of reduced closing costs and no closing cost refinancing, lowering your mortgage rate to current market rates could substantially reduce your monthly payment and save you real money.
  • Shorten your mortgage term. Many homeowners refinanced and reduce their 30-year loan terms to 20, 15, or 10 years and eliminated tens of thousands of dollars in interest owed over the life of their loan. In addition, mortgages with shorter terms like 15 or 10 years almost always carry lower interest rates than those for 30-year mortgages.
  • Access the equity in your home to get extra cash. Property values are on the rise, especially in markets like Dallas, Denver, Portland and Seattle. As a result, you may be eligible to obtain some extra cash when you refinance and lower your monthly payment at the same time. Homeowners who choose this option often use the extra cash to pay for home improvements, pay off other debts such as credit cards, or to help pay for a child’s tuition. This type of refinance is typically much safer than taking out a home equity line of credit, which often times contain risky provisions like interest only payments and balloon payments.
  • Get rid of costly Private Mortgage Insurance (PMI) or FHA Mortgage Insurance Premium (MIP). Depending on the type of loan you currently have, if your home has sufficiently appreciated in value you may be eligible to eliminate your private mortgage insurance each month. This could provide another level of savings to you in addition to lowering your interest rate.

Mortgage rates have remained low in 2017, thanks largely to a low inflation rate and a relatively stable rate of economic growth. But thanks to the Federal Reserve, all of that may be changing. The Fed just raised interest rates on June 15, and if you believe the recent testimony of Fed Reserve President Janet Yellen, more interest rate hikes may be right around the corner. If you’re a homeowner who last refinanced their mortgage in 2013, you owe it to yourself to consider refinancing.

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