March 9

Refinancing To Reduce Your Bills and Increase Available Cash

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When is the best time to refinance your home to reduce your monthly payments and free up more cash each month?

Could this be your best opportunity to access cash from the equity in your home, or refinance your Seattle home to reduce your interest rate and monthly payments?

There has been a lot happening this year. For many it will be a make or break year, from which they come out ahead and enjoy even better finances in the next phase of the economy. Many others will miss their chance and could end up paying the price for many years. 

So, is refinancing your Seattle home for you? Who should do it? How do you know the best time to refinance?


Financial Trends

The past few months have created a whirlwind of new financial trends impacting both big businesses and individuals and their families too. Those who haven’t felt it yet certainly will.

At the top of the financial food chain we’ve seen many huge and long running companies go bankrupt or close many, if not all of their retail stores. This includes AT&T, JCPenney, GNC, Starbucks, Nordstrom, Gap, Neiman Marcus, 24 Hour Fitness and even Microsoft.

Civil unrest and pandemic shutdowns have in turn taken a big toll on personal finances too. According to CNBC, 32% of US households have been unable to make their housing payments. The Washington Post reports that mortgage delinquencies have risen to their highest point in at least 10 years. Millions are headed towards foreclosure, even if governments have temporarily stalled evictions. 

Even most of those who have managed to stay afloat have done so by tapping emergency savings and credit cards. That can only last so long. US consumers now hold almost one trillion dollars in credit card debt. Many have survived by deferring payments for the past few months. Though most creditors are now telling customers that any COVID-19 help is over. They either have to pay up on time, or their accounts will be closed and they will be turned over to collections.

Some pretty large banks and credit card issuers like Capital One have been reportedly slashing credit lines to reduce their exposure to risk. 

The most common scenario is that people start using their credit cards to cover other necessities. Then, when their balances rise, their credit scores take a big hit. Lenders often use that as an excuse to cut credit limits and increase interest rates. Consider that rates on credit cards can be above 20%, even though long term mortgage rates could be in the 2% range.

This is a vicious cycle and downward spiral. The more limits are cut and higher balances go, the worse credit scores get. This is all even if you never miss a payment on anything.

The longer people wait to get help, the fewer options they have.

It’s not all doom and gloom. Multi-billion dollar new businesses are being created, and many are seeing their incomes and wealth increase. However, in order to take advantage of these new opportunities, it requires some financial freedom, and the disposable cash to embrace a new career, start a business or make the best investments. Or at a minimum, improving their current monthly debt to income situation and having a better cushion. 

For many, that could all come down to seizing the right moment to refinance a property. 


When to Refinance Your Property in Seattle

When is the best time to refinance your property in Washington State?

Put simply, it is before you run out of options. Even better, if you can refinance before you need it. That’s when you get the very best interest rates and terms. 

There are some general financial principles for when it is right to refinance a residence, vacation home or investment property. Yet, it also comes down to your unique individual situation.

Let’s break it down…


Good Versus Bad Reasons to Refinance Your Home

Most mortgage lenders and banks are happy to take your money and get interest for any reason. Whether it really helps or is in your best interest or not. They’ll always tell you it is a great time for you to refinance or buy a new home. Because it is at least a good time for them to make a new loan.

Yet, there can be some reasons that people refinance or take out home equity that may not be in their best financial interest.

Like:

  • Going on a dream vacation
  • Buying toys you can’t afford, like boats and ATVs
  • Paying off debt, only to reload on bad debt again and double your indebtedness
  • For cosmetic home redecorating that doesn’t add any real value
  • For extra spending cash to show off for neighbors and friends

Valid and good reasons to refinance your home may include:

  • Preserving accumulated wealth
  • Reducing your monthly payments or total finance costs
  • To recapitalize and increase cash to avoid foreclosure
  • To pay off other high interest rate debt, and lower total monthly payments
  • Making a conversion to a multi-generational home
  • Bridge financing to buy another home to downsize to


Types of Refinance

There is more than one type of mortgage refinance.

Rate & Term Refinance: Lowers your interest rate and/or monthly payment

Cash Out Refinance: Gives you a lump sum of cash from your home equity for any purpose

Debt Consolidation: Pays off other debts, and gives you a better rate than a cash out refi

Limited Cash Out Refinance: Directly pays off other higher rate debts, with a better loan deal than a full cash out refinance

If you have other loans and credit card debt on which you are paying 10%, 20% or more interest, you could refinance, combine that all into one simple payment each month, and save many thousands of dollars with a new mortgage and interest rates in the low single digits. 

For many it brings a lot of peace of mind, helps them reset and bring back their credit scores. 

Right now mortgage interest rates are at incredible lows, making this even more attractive. Home values are also at a peak, enabling homeowners to access more cash or get better rates than since they bought their home. 

The risk of waiting is declining credit scores which could prevent you from getting a home loan, or neighboring foreclosures which could bring down your home value and erase your equity. Not to mention the ongoing stress of dealing with all those bills and collection calls.

Talk to a Seattle mortgage broker today and find out how much you could save by refinancing your home. 


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