Refinance Your Mortgage in 2022 Before it’s Too Late

Mortgage refinance is defined as taking a new mortgage to pay off an old one. Based on expert analysis, projections indicate that there may be a spike in mortgage interest rates in 2022. Homeowners can take advantage of mortgage refinancing today, which could lower their interest rates by a minimum of 0.75%. In this article, we have articulated the dominant reasons to refinance as soon as possible to help you determine refinancing your mortgage loan before the end of 2021 makes sense.

1. To Get a Lower Interest Rate

Different people may experience different outcomes when it comes to refinancing their mortgages. This is because some may encounter an increased interest cost. But homeowners looking forward to saving money should consider mortgage refinancing. The Covid pandemic has lowered mortgage interest rates which have recorded historic lows. Data disseminated by Freddie Mac indicates that the average rates are:

  •         30-year fixed-rate refinance:3.00%
  •         15-year fixed-rate refinance: 2.50%

These historic lows will surely save you bucks if you consider mortgage refinance before the end of the year. In addition, getting approval for a mortgage has recently been fast and straightforward compared to previous years. Hence, the refinance process will be more seamless than the original mortgage application.

If you lower your mortgage interest rates by 1.0%, you will be saving approximately 10% every month on your mortgage repayment. For instance, every $150 paid to the lender today will save you $150 on your payments. That will be $18,000 saved for the next ten years.

Refinancing a 30-year mortgage with a new 30-year mortgage can result in higher interest rates. In the case where you refinance a 30-year mortgage with a 20-year plan, there will be lower interest rates and reduced total interest costs during your mortgage life.

A 15-year refinance is an ideal plan for homeowners seeking a balance between lowering interest costs and having a manageable monthly payment. For a 10-year refinance, you will clear your mortgage sooner and maximize interest savings. You should note that this may impose higher monthly payments.

These mortgage refinance rates aren’t there to stay, as insights state that there will be an increase in 2022. The insights have been projected owing to the fact that the economy has demonstrated resilience from the pandemic. Thus, taking advantage of the current mortgage rates may be a great step towards reducing your monthly payments.

2. Return of the “Adverse fee”

The Federal Housing Finance Agency (FHFA) made a recent announcement that there will be an “adverse fee” that will be incorporated in any refinances involving Fannie Mae or Freddie Mac. All loan balances above $125,000 will be sold to the two government-sponsored enterprises. This will make them liable to a fee of 0.5% of the loan balance. For instance, a $300,000 loan will be subjected to a fee equivalent to $1,500.

There is a high probability that most borrowers will be caught up in the “adverse fee” situation. This is because approximately half of the mortgage loans in the United States originate from either Fannie Mae or Freddie Mac.

In this regard, homeowners who need to pocket some savings can take advantage of today’s mortgage refinance rates. This will be with an “adverse fee” exemption, which is expected to kick in soon. The fee was estimated to be active on September 1, 2020, but was pushed forward following the recent industry backlash. Nonetheless, you should be aware that the timeframe between now and when the fee will be implemented is quickly closing. Many financial institutions and lenders have already started incorporating the fee into their loan estimates.

3. Tapping Home Equity

Though mortgage refinance can mount up huge debts, most homeowners use the equity of their homes to resolve significant expenses. This may involve financing a large purchase, debt consolidation, home remodeling, and others.

Remodeling adds value to your home, and the interest rate on the mortgage loan will be lower compared to getting funds from another source. In addition, the interest rate is tax-deductible, which requires a minimum of $750,000. The closing costs cannot be deemed as tax-deductible if they are fees for services such as little insurance and appraisals.

Mortgage refinance is an ideal way to consolidate your debt. This is because you replace a high-interest debt with a low-interest one. Most homeowners also refinance to pay for financial emergencies. However, you are required to weigh all other potential financial options before using this step as your ideal choice.

Taking advantage of the current mortgage rates can ensure that you get the best of your home equity. This is paramount in ensuring that you tap adequate home equity, which can be used during periods of financial complications.

Gauge Whether Refinancing Is Ideal for Your Case

Before you jump into refinancing, you ought to weigh the closing costs and compute the duration that the savings will take to cover refinancing expenses.

One imperative factor to consider is the time you intend to reside in the home. Refinancing is accompanied by an upfront cost which may take a while to break the cost even when using your savings. Hence, it is recommended that you reside in the home for a long duration to record substantial savings. Financial experts state that it takes a period of four years to break even on the cost after renewing a home loan.

In this regard, if today’s low rates can work well with you, ensure that you take your break-even point prior to making a decision.

Conclusion

Over the years, refinancing has been an excellent option for homeowners due to the immense benefits that come with it. Such benefits include getting a lower tax rate, tapping in home equity, reducing monthly payments, to name a few. After the pandemic, the current mortgage rates have recorded historic lows, a great advantage for homeowners.

It has proven to be a great way to take advantage of the low mortgage refinance rates and enjoy utmost savings as you pay for your mortgage. In addition, refinancing your loan before the end of 2021 is ideal in escaping the “adverse fee”, which is set to kick in any time soon. However, homeowners are advised to scrutinize their situation to ensure that it will bring positive results before the end of 2021. The best way can be checking out Lendstart’s mortgage refinance lineup, which outlines service providers and is key in comparing the refinance rates.

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