Why You Should Refinance Your Mortgage in 2021 to Make Big Money

Tom Handy

Ideas you should consider today for more money tomorrow

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As interest rates remain ridiculously low in 2020 and will likely stay the same in 2021, you need to refinance your mortgage. Rates are not going higher but you shouldn’t wait too long before they rise.

According to the man running the show, Jerome Powell, Chair of the Federal Reserve, he said rates will stay the same in a recent interview. What Jerome says will be the norm even as President Biden takes office. Anything Biden does will take a little bit of time to trickle down into the economy.

If you want to save money heading into 2021, you need to refinance your mortgage. I recently refinanced my home and signed the paperwork a little over a week ago. This is a rough estimate of the money I’ll see.

1. I’ll skip two monthly mortgage payments (November and December).

2. My escrow money will be returned in a few weeks which is thousands of dollars.

3. My mortgage payment drops by $194.29 a month. Over a year I have saved $2,331.48. Over 30 years this equals $69,944.40.

If you plan to stay in your home for a few more years, refinancing your mortgage may be the best thing you can do.

Interest Rates

You must gain control over your money. Or the lack of it will forever control you.
Dave Ramsey

The current interest rate for refinancing your home varies. I was able to lock in an interest rate of 2.75% which is incredibly low for a home mortgage. If you refinance your home, your interest rate may be similar.

When you should not refinance your mortgage

The lack of money is the root of all evil.
Mark Twain

There are some times when you should refinance your mortgage.

  1. If you have been paying on your mortgage for years, it may not make sense to refinance your mortgage. If your mortgage has less than 10 years to pay it off, then it may not make sense to refinance the mortgage.
  2. If the refinance doesn’t save you more than $100, then it does not make sense to refinance the mortgage. You want to make money when you refinance your home. The money you save should make a difference for years to come.

What you should do

The rich invest in time, the poor invest in money.
Warren Buffett

Contact your mortgage lender and let them know you want to refinance your home. Your mortgage lender should be able to tell you in a few minutes if it makes sense to refinance your home.

30-year loan. You can refinance your loan to another 30-year loan. If you have lived in your home for a few years, then this may make sense. Your interest rate may be around 3.5% or more. You should look at refinancing your current loan.

The down-side is your loan resets and adds more years to your home repayment. If you plan to live in your home for several more years, then you should consider the pros and cons of refinancing your home. This really comes down to the numbers. Your mortgage lender may be able to tell you if it makes sense.

15-year loan. If another loan doesn’t make sense, ask about refinancing your home to a 15-year loan. The interest rate will be lower than a 30-year loan but your monthly payment will be a little higher. This is all about the numbers. Let your mortgage lender crunch the numbers to see if it is worth refinancing.

Refinancing may not work for you but then it may. Your mortgage lender can run the numbers to see if it makes sense for you.

If you want to get an idea on your own, run the numbers on this calculator. See if the numbers make sense to refinance your home.

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