There could not be a better time to refinance. We’ve seen several clients recently refinance their home to help save several hundred dollars on their monthly payment each month! So we wanted to walk you through your options for refinancing. Download the excel template below and watch the video to learn how to do this yourself!
If you’re going to refinance, you want to make sure of 2 things:
1) You plan on staying in the home for at least two years in order to at least break even for the cost of refinancing, and 2) You are able to refinance and drop your interest rate by at least 1%.
Right now, we’re seeing interest rates of around 2.5% give or take. This means if you currently have an interest rate of 3.5% then you should definitely consider refinancing. Go ahead and check with your lender to see what kind of interest rates you can get.
There are two numbers that are very important in figuring out if refinancing is a good option. The first is the interest rate, which we just discussed. The second is the current market value. If you’re interested in knowing the current value of your property, reach out to us below and we’ll be happy to run the numbers for you.
You can also run the numbers yourself using this excel spreadsheet (click to download) we put together. All you have to do is complete the gray boxes and the template will run the numbers for you. You can see this by going to the “analyze” tab at the bottom where there are a couple different refinance options.
The first option is where you enter your current situation. Mind you, the total monthly payment might be different because your insurance and your taxes will be different. The main number that you should focus on is the monthly payment for your mortgage. That would be your principal and interest.
The second option therefore shows the “cash out refinance” possibility. So essentially, if you were to keep the interest rate the same, you’ll see both the new total monthly payment and how much cash you would be able to pull out. Typically, you have to keep 20% in. But if you have less than what you paid off (such as in this situation our pay off is $30,000), then you would actually collect a check for $26k which could go to buying an investment property, fixing up your house, investing in the stock market, or whatever you want.
The third scenario shows what would happen if you didn’t need to pull out money and kept all things the same except for your interest payment. This will then show how much your monthly payment will go down.
The last scenario is for those of you who are in a good position and don’t want to change your monthly payment, but would like to pay off your mortgage earlier so you can own the house free and clear. Therefore, this last option shows what you can refinance for in a 15 year period. This will then show you roughly what your payment would be.
It’s important to remember that all of these are estimates to help you make a decision, but the real person that can help you is your lender. They will be able to give you the most accurate information regarding your monthly payments and overall costs would be.
We’ve put together a list of our top recommended lenders in Northwest Arkansas. We don’t receive any “kick back” if you use these lenders, we just genuinely want you to have the best experience – and these people provide a great service in terms of communication and openness. Check them out here.
Maybe you don’t want to refinance and you realize you also don’t want to live in your current home for the next 2 years. In this case, it might be the right time to sell your property and purchase a new one with a better interest rate. If this is the case, go ahead and give us a call at (479) 227-2030 or reach out below and we’ll analyze what your property could sell for.
The last thing to remember is that the appraisal value for refinancing will be different from the price you could actually sell your home for. So if you ask one of our agents what the value of your house is currently, it will be a lot higher than what the bank values it for in terms of refinancing. Therefore, you want to be conservative when estimating your property’s sale price, and liberal estimating what you can hopefully get when we try to sell.
Let us know if you have any questions!
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