Refinancing My House!: Pros and Cons

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In today's episode of The ZVP Show, we talk about Refinancing A Property! If you want to learn more on personal finance, how to build wealth through real estate, or how to be successful at you 9-5, be sure to subscribe to the channel!

In an article published this week by CNBC stated that mortgage applications were up 55% from last week and the volume was up 192% higher so far this year

Additionally, due to the major drop in mortgage rates, refinance applications rose by 79% for the week and were up 479% from last year!

The average interest rate for a 30-year fixed rate mortgage on a balance of $510,000 or less is down to a low of 3.47% for loans with a 20% down payment!

So here are some reasons why many people refinance, and ultimately why I made the decision to refinance one of my properties

Reasons to Refinance:
Reduce interest rate
Let’s say when you originally bought a home, the interest rates were at 5% and now they’ve dropped down to 3.5%. You can refinance to the lower interest rate and save some money by not having to pay so much in interest.

Getting Rid of Mortgage Insurance
Usually if you have a loan where you put less than 20% down on the property, you end up with Mortgage insurance
Once you achieve that 20% equity position usually Mortgage Insurance goes away.
But in the case of an FHA loan, you end up paying Mortgage insurance over the whole life of the loan.
So if you have this type of loan, once you achieve a 20% equity position, either through paying down on the loan, or the value of your property goes up, refinancing to remove the mortgage insurance can end up saving quite a bit of money on your payments.

Cash out refinance
This one is applicable to real estate investors and works like this

Cons of Refinancing:

Resetting the amortization schedule of the loan.

Each month that the home is paid on, the amount towards interest becomes less and the amount paid towards principal goes up
So if you’ve been paying on a home for over 5-10 years, resetting that amortization schedule really sucks.

Refinancing Costs Money!

There is no such thing as a free refinance although some companies might say they will do it.
There are some companies that offer a no closing cost refinance but that cost is either wrapped up into the loan or with a higher interest rate which involves taking negative points on the loan
Most refinances cost somewhere between 1-5% of the loan total. So if you refinance on a 500K loan, you could end up paying $5,000 to $25,000.

Taking on Extra Debt!
Particularly with a Cash-Out Refinance, when someone goes to refinance, they are pulling out extra debt.

General guidance on refinancing

Refinancing resets the amortization schedule.
Refinancing costs money!
Be Smart!

As always, thank you for watching this video! If you enjoyed this content, be sure to give it a like and subscribe to my channel! I release content every Tuesday and Saturday!
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Your video prompted me to look into refinancing our property. Our interest rate will be dropping from 4.5% all the way down to 2.75%, saving use around $250 a month! The savings is going to be used to pay down our vehicle loan and get it paid off quicker! Thanks ZVP!

Lmikesta