There are plenty of reasons to refinance your home loan besides interest rates. Everyone's situation is different and you should take you're entire financial situation into consideration before refinancing.
But if you want to talk about interest rates, let's talk about interest rates. Rates have been declining since 2000. Back then the average home loan interest rate was 8.05%. Today in 2014 the average interest rate is 4.35%. That's a huge decrease and one that as many as half of all mortgage owners have not taken advantage of.
The reality is that rates will not stay at current lows forever. In fact, current home loan interest rates are always fluctuating. Sitting back and trying to time market conditions is usually not the best idea. Usually people wait too long and miss out on the opportunity.
If you look back to November 29th of 2012 that you would see that 30 year fixed mortgage rates were at 3.32%. That was the lowest they had been since 1975. Interest rates have already started to recover but at an average of 4.35% today there is still a lot of savings being left on the table by homeowners.
We're not economists but if you play around with this graph long enough you'll notice that interest rates are not normally this low. This is not a "let's time the market" play. The people who are sitting in mortgages with 6% interest rates are losing out on a lot of savings in terms of monthly payments and interest expenses over the life of their loan.
Should I refinance? 5 reasons you should refinance this year.
- Interest rates - This is the first reason you should refinance this year and it's the number one reason most people do. Just reducing your interest rate by 1% can save you hundreds of dollars a month on your mortgage payment and save you thousands of dollars over the life of your home loan in interest.
- Home equity has recovered - A majority of homeowners have seen the equity in their homes increase. The average equity across all mortgaged properties is 32.8%. This is well above the amount needed to make refinancing an attractive money saving option.
- Fast way to get rid of private mortage insurance (PMI) - PMI is expensive, sometimes adding over $100 to your monthly mortgage payment. Refinancing is a quick and easy way to get rid of PMI as long as you have at least 20% equity in your home. Not only can you rid yourself of PMI but you'll most likely be able to get a lower rate and save even more money on your monthly payments.
- Consolidate high interest credit cards - Average credit card interest rates are 15.01%. You can refinance and consolidate those high interest rate cards or student loans into one low rate when you refinance. When you consider the average U.S. household has $15,191 in credit card debt (source) you can see why this is an opportune time to get rid of it.
- Tackle a home improvement cost (or other large expense) - Do you have a home improvement project you want to tackle? Do you want to by a new car? Take a vacation? The list goes on. If you have a decent amount of equity in your home you could do a cash-out refi and get the cash you need for your project or purchase.
There are many more reasons to consider refinancing your home loan. But don't try to research every single reason why you should do it before you start the process. At the bare minimum go to our free rate quote tool and get a free personalized quote in 30 seconds. We'll help you every step of the way to get the savings you deserve.