Reasons to Refinance

Our culture accepts the fact that we will live with some form of debt at one point or another. Why not try and pay it off and leave the worries?

Pay it off for the long haul.

Americans have accepted living with debt. According to NerdWallet.com, as of October 2015, the average U.S. household consumer carries $16,140 in credit card debt and $31,946 in student loan debt.

Additionally, credit card interest rates can vary between 13% and 16%, which increases the amount owed unless paid down significantly. And if you include the average auto loan, that’s another $28,711 being financed (per debt.org).Clearly, these are large and intimidating financial figures for the majority. It’s understandable that most people would want to pay off these obligations as quickly and efficiently as possible and at the lowest interest rate as they can.

That’s why many people investigate the option of refinancing their existing mortgage. If this is the right option for you, Arrowhead Home Loans will be there to help you get pre-qualified and support you through the refinance process.

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Protect your investment.

As rates change, there are opportunities for people to evaluate their current mortgage to see if there are other mortgage products, or conditions, that would allow them to put more of their payment into the equity of their home, as opposed to the interest they pay. And doing a review of different mortgage products every few years is a good way to make sure you are paying the least amount or using your equity to save you money on other higher interest rate loans.

As an example, you may have a 30-year fixed rate conventional loan that charges 7% and you closed in 2002. Even though you see that interest rates have generally been lower than 7% since 2002, adjustable rates still make you nervous. Perhaps you research a 15-Year Fixed Rate Conventional Loan that charges 3%. You may be able to refinance your 30-year loan to a 15-year loan with a lower rate to pay off your mortgage faster, while not impacting your payment too much.

Or, perhaps you are a bit more risk-tolerant and decided that a 5/1 Adjustable Rate Mortgage had a great rate in 2009. The first five years were great because rates were around 5% and you paid this fixed rate. Then in 2013, rates were even lower and your rate adjusted downward, but you’ve recently heard that interest rates could climb and you want to lock in a low rate now. You can try a 15 or 20-year fixed rate mortgage to protect the lower rates you’ve become accustomed to, and continue to build equity in your home.

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College is calling.

Studies show that college graduates earn more money and are more likely to be able to hold a job than people who don’t attend college. CollegeBoard.org reports that in 2011, people with a bachelor’s degree who worked full-time earned $21,100, more on average than those who held just a high school diploma.

Most parents want to provide their children with any advantage they can, and a strong education can be the path by which children can gain independence and a secure future. The cost of college can be paid in three ways: before, during or after college — and the costs can be exorbitant for all three. That’s why many people investigate the option of refinancing their existing mortgage.

According to the National Center for Education Statistics, in addressing questions regarding the trends around college costs and tuition, they state:For the 2012–13 academic year, annual current dollar prices for undergraduate tuition, room, and board were estimated to be $15,022 at public institutions, $39,173 at private non-profit institutions, and $23,158 at private for-profit institutions. Between 2002–03 and 2012–13, prices for undergraduate tuition, room, and board at public institutions rose 39 percent, and prices at private nonprofit institutions rose 27 percent, after adjustment for inflation.

SOURCE: U.S. Department of Education, National Center for Education Statistics. (2015). Digest of Education Statistics, 2013 (NCES 2015-011), Chapter 3.Average total tuition, fees, and room and board rates charged for full-time undergraduate students in degree-granting institutions, by type and control of institution: Selected year, 2012–13.

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Retirement is calling.

There have been many stories in the news about the struggle of senior citizens trying to live purely on Social Security. According to ssa.gov, 46% of single, retired Americans rely on Social Security for most of their income, but the average monthly Social Security payout is only $1,269. Unfortunately, that may not cover many people’s expenses or way of living that they may have become accustomed to before retiring.

One tool that some advisors use is replacement income. The idea is that, in retirement, your income should be 70% of your pre-retirement income. This calculation is only an estimate, but it was recently reported on researchscape.com that, on average, only the states of Nevada and Hawaii have seniors living at that rate. Many states in New England have seniors living at 50% of pre-retirement income.

Even if you do everything right, like spend conservatively and put money into 401(k) plans that offer corporate matching or IRAs, there are things in life that can’t be predicted. Many seniors have medical expenses that aren’t covered by their insurance or Medicare. They find themselves using their savings to pay for these unplanned expenses instead of using the money to travel or pursue interests.

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Types of Loans for Retirement.

HECM Home Loan - The HECM proceeds from the equity in your current home is available when you need it and can help you pay bills and other expenses.

HECM For Purchase - You can also purchase a home and get a HECM in all one transaction.

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