How can you save the most money and get the maximum benefit out of your next Seattle mortgage refinance?
You are refinancing your Seattle home mortgage to save more money or overall improve your financial position. Not all refinances are created equal. This isn’t something you want to do every day. So, make sure you are making the most of it, and are saving as much as you can in the process.
Check out these seven ways to save more when refinancing your home loan in Seattle…
1. Don’t Take Out More Than You Need
The more money that you borrow, the more interest you’ll pay. You may also have taxes and higher insurance coverage requirements. If you are doing a cash out refinance, don’t take more than you really need and can use. If you have extra money in the bank which is earning a miserable interest rate, then you may even want to pay down your balance a little when refinancing. A lower loan to value loan can also help you qualify for the best possible rates and loan deal.
2. Shorten The Length Of Your Home Loan
Extending the length of your loan and repayment can give you the lowest payments and most flexibility every month. Some people need that.
However, one mistake many make is constantly extending how long they are paying on their home. They take out a 30 year mortgage. Then refinance it for another 30 years after just 5 years in. Then again, and again. It just keeps on moving the goalpost of paying off your home further down the road. You end up paying a lot more interest over time. Unless you are very disciplined about paying extra towards the principal when you can.
If you’ve been in your home and mortgage for 10 years already, try refinancing on a 20 year mortgage. Even better if you can do a 15 year loan. Your interest should be lower, and you’ll pay a lot less over the life of your loan.
3. Combine Mortgages For A Better Blended Rate
Don’t just refinance a first or second mortgage or line of credit separately. It probably makes more sense to combine those now. It can also help you lock in a better long term fixed interest rate. Look at the combined or blended rate or a new loan versus what you are really paying now.
This also has the hidden benefit of freeing up your home so that you could take out another second mortgage or line of credit in a dire emergency or if your home appreciates dramatically in the future.
4. Consolidate Other High Rate Debt
If you have other debt at higher interest rates this may be a smart time to refinance that debt and consolidate everything into one payment. If you have car payments and credit cards or other loans at higher rates, do the math on what you can save by the time you pay them off.
This can add thousands of dollars in extra savings, free up your credit, and boost your credit score. Not to mention helping you sleep a lot better at night.
5. Limited Cash Out Refinance
Lenders charge more interest when you are taking cash out in a refinance versus just refinancing the rate and term of your Seattle mortgage. You can get a better rate by taking no cash out. Or you may be able to get the best of both worlds with a debt consolidation refinance or ‘limited cash out refinance’. In this loan option you can pay off other high rate debt and get up to around 2% of your property’s value in cash, without triggering the higher rate of a full cash out refinance.
6. ARM Vs. Fixed Rate Mortgage Loan
One of the big decisions to make on your Seattle mortgage refinance is whether you’ll opt for a new long term fixed rate loan or an adjustable rate mortgage.
If you only plan to stay another 5 to 7 years, you may find even greater savings with an ARM loan. Your rate can be much lower, and your payments too. However, if you want to lock in your housing payments and keep them low for the rest of your life and loan, you may find the most savings in a 30 year fixed loan.
7. Ask To Pay Points
While it may sound counterintuitive at first, this may help you produce the most savings on your Seattle mortgage refinance.
Your interest rate and lender points at closing are a balancing act.
You might get offered a no points refinance loan, but will find it comes with a higher interest rate. If you want the lowest possible interest rate, you’ll find more points on your loan.
When you bought your home in Seattle you may have thought a no points mortgage loan was the best sounding option. It may have even meant the least money out of pocket. Though it means you are paying for it in the interest rate year after year.
If you need the most cash out of your home equity in a refinance, and don’t plan to keep your home in Seattle long term, then no points might be the way to go again.
However, if you do plan to keep this home for another 15 or 30 years, then financing a couple of points now, can reduce your monthly payments, and give you a lower rate for the rest of the time you have a mortgage. This can save tens or even hundreds of thousands of dollars, depending on the size of your loan.
Ask your Seattle mortgage broker to give you a side by side comparison of these options so that you can pick the best fitting terms and optimal savings for your life plans.
For many Seattle homeowners, a refinance is a great way to save finances over the years, as well as to lower monthly payment obligations and even access additional cash. Since you won’t be refinancing on a daily basis, check out these options for achieving even greater savings, and making your Seattle mortgage refinance even more profitable.