People who plan to retire soon and have higher interest mortgages should consider many factors before refinancing, such as the length of time they plan to live at home and their impact on new budgets.
Retirees usually live on a fixed budget, which includes money saved in various retirement accounts and social security.
When assessing the pros and cons of home refinancing, multi-lender sites such as Credible can help guide you. Specifically, Credible can compare multiple lenders and refinancing rates in one screen, so you can see if you can save money and shorten the life of the loan throughout the process.
Before planning to refinance a mortgage, homeowners planning to retire in the next two years should consider the following factors:
- Affordable loan payments
- Refinancing cost
- Refinance with the same lender
- Keep cash
1. Affordable loan payments
Retirees should determine the future monthly new mortgage amount (as well as taxes and insurance) before refinancing. Property taxes and housing insurance have also risen over time.
All homeowners, regardless of their age, should shop around to lower interest rates. Use Credible to find the best offers around.
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Retirees should also consider their future financial status and medical care needs to determine whether it makes more sense to obtain a 30-year loan compared with a 15-year loan in terms of monthly repayment. Although the cost of a 15-year mortgage is lower, in the long run, homeowners will have to pay higher monthly repayments.
Leslie Tayne, a full-time attorney on debt issues in Melville, New York, said: “Before making a decision, please make sure you stay at home long enough to make the fundraising expenses reach the balance. balance.”
She said that retirees may consider extending the loan period and making additional payments to shorten the repayment time, as long as it matches their new budget.
Refinancing rate today
- 15-year average refinancing mortgage: 2.65%
- An average 30-year refinancing mortgage: 3.14%.
To see how much you can save on monthly mortgage payments through refinancing now, use Credible’s free online tool to calculate numbers and compare interest rates. In a matter of minutes, you can see what multiple mortgage lenders offer.
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2. Refinancing costs
Settlement fees usually account for 2% to 5% of the mortgage loan amount. Although most mortgage lenders include these expenses in the refinancing mortgage, consider whether it is worth spending thousands of dollars once you retire and live on a fixed income.
Tyne said it plans to spend between US$5,000 and US$10,000 for refinancing, but the amount varies.
She said: “Many banks allow consumers to include these costs in new loans, which may mean drawing larger loans than before and cutting equity.” “Applicants should keep their loan-to-value (LTV) ratio in mind. To understand how including these costs can be combined with their income.”
Tayne said, please consider whether the house can be affordable after retirement, especially if the budget is limited. Even with a refinancing, keeping your current home may not fit your new budget.
She said: “The consideration may be to reduce housing expenses by selling houses.”
If you want to refinance, please consider using Credible. You can use Credible’s free online tool to easily compare multiple lenders and view prequalified interest rates in just three minutes.
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3. Refinancing with the same lender
Consider refinancing with the same lender, as you may be able to save some costs. Some lenders are willing to waive current borrowers’ evaluation or application fees. Please shop around before making a decision, as lenders will often change their choices.
Tyne said: “You may want to consider refinancing from banks that already have loans, rather than seeking other lenders, which may reduce costs.”
If you have estimated checkout costs, use the online mortgage refinancing calculator to determine the new monthly cost.
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4. Keep cash
Darren Bronsky, head of Sonoma Wealth Advisors in California, said that after retirement, it may be wise to not invest most of the money in the house. Since the amount of disposable income will decrease once you stop working, it is a good idea to have more cash on hand for house renovations, medical expenses, travel or other expenses instead of an additional mortgage.
He said: “It’s not a good idea to spend all your money at home, especially if you don’t have enough savings to retire.” He said: “If you save enough money for retirement, you can use the extra Deposits of cash in CD or short-term bond ETFs, such as JPMorgan Chase’s ultra-short-term yield ETF (JPST),”
Once the house is paid off, homeowners often fall into a false sense of security because they still need to budget for property taxes, insurance and maintenance costs.
It is important for retirees to keep low costs when on a fixed income. Refinancing can reduce your monthly payment. Looking around the current mortgage interest rates can help you determine whether refinancing is right for you and your financial situation.
Visit Credible to get in touch with an experienced loan officer and answer your mortgage questions.
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