Refinancing your mortgage can be a great way to save money by reducing monthly mortgage payments. Saving money is not the only benefit procured through a refinance, however. Some refinance plans reduce the length of a mortgage term. Others allow for mortgage types to be changed for your short-term or long-term benefit. Perhaps most importantly during the financially challenging COVID-19 pandemic, refinancing your mortgage helps provide much-needed cash when experiencing financial hardship.
Financial hardship is often unexpected and also never pleasant. Most people buying homes understand their financial capabilities and limitations when signing the loan papers at the bank. Challenges arise, and help is sometimes needed. COVID-19 adds a deeper more devastating layer to financial hardships and for some homeowners, refinancing a mortgage is the only way to overcome the issues at hand.
Renters are suffering. Homeowners are at risk. Banks are also not untouchable by the pandemic, although they are better suited to handle the financial pressures in 2020 than they were during the recession of 2008. This means banks can play an instrumental role in helping the economy stay afloat this time. One of the ways they are capable of doing this is by providing affordable refinance rates to customers for a variety of needs. Read on to learn about the best options to refinance your mortgage today.
Reasons to Refinance Your Mortgage
There are multiple reasons to refinance your mortgage. Money is of course at the core of many of these reasons. Stability, peace of mind and an improved quality of life are reasons not far down the list. Additional reasons to refinance your mortgage are:
- Reduced interest rates
- Home improvements
- Debt Consolidation
- Increased large purchase power
Reduced Interest Rates
Refinancing your mortgage at the right time can result in lower interest rates and lower minimum monthly payments. This can serve a dual purpose. Money saved from lower interest rates and minimum monthly payments can be designated for other expenses. It can also be used to more quickly pay off a mortgage in its entirety. By paying the same monthly amount you did before refinancing at a reduced rate, the surplus money in each monthly payment goes toward the principle. This reduces the amount of time required to pay off the your mortgage and own your home outright. It can also increase the speed at which your home builds up viable equity.
Mortgage Refinancing for Home Improvements
Some times a home needs to be expanded. New babies are coming into the family fold, or in-laws are moving in. Maybe a new entertainment area is needed or an indoor/outdoor patio to enjoy nature all year long.
There are also times homes must be improved due to damage. Trees can fall. Wind can damage roofs or shatter windows. Home insurance covers some issues, but not all. Even when insurance does cover home improvement expenses, it might take longer than feasible for them to pay the associated bills. Refinancing your mortgage can provide funds for home improvement projects regardless of why they are being completed or how quickly insurance issues reimbursement checks.
Debt Consolidation Refinancing
Debts can accumulate even under the best of circumstances. When financial hardship becomes overwhelming, refinancing your mortgage for debt consolidation can be a significant help. Debt consolidation reduces monthly expenses and puts all or most debts into one account, which can be paid off at a combined better interest rate and lower cumulative monthly payment. This type of financial assistance is especially helping during the COVID-19 pandemic when so many people are struggling to pay bills, rent and meet mortgage obligations.
Increase Your Large Purchase Power by Refinancing Your Mortgage
Sometimes it makes sense to refinance your mortgage at a lower rate while also receiving much-needed cash. This can be helpful for college tuition payments, or large medical/dental bills not covered by insurance. The money can also be used to help pay for assisted living for an elderly relative in need. It can further be helpful for large recreational purchases such as a boat or RV (recreational vehicle).
Mortgage Refinancing and COVID-19
There are many benefits to refinancing your mortgage as described above. COVID-19 makes an already complicated life significantly more complicated and if refinancing your mortgage can ease your burdens, then why not make the move? At the same time, COVD-19 has created an adverse housing market. The pandemic creates risk for both borrowers and lenders. The more homeowners are late on their mortgage payments, the more banks and other lenders are losing money.
This is the dichotomy of COVID-19 and the mortgage refinancing business. Refinancing your mortgage can save you money or help in other ways. Banks and other lenders are beginning to impose an adverse market fees to their loan programs, however. These added fees are meant to help keep banks/lenders in business. They can also potentially negate the savings benefits of refinancing your mortgage.
Best Mortgage Refinance Rates and Companies in 2020
Lowering your interest rate by 1-2 percent during a refinance can save significant money each month and over the long-term. Current refinance rates vary by lender but are averaging between 2.25 and a flat 3 percent. Rates will fluctuate as dictated by both normal market trends and the adverse housing market as influenced by COVID-19. Some of the best mortgage refinance companies we found for 2020 include: