Feb. 6, 2020

This paid piece is sponsored by MetaBank.

Even if you think you have a low mortgage rate, this still might be the time to consider refinancing.

Thanks to continued low interest rates, the refinancing market is expected to be robust this year, offering homeowners the chance to take advantage of lower monthly payments, pay their mortgage off sooner or free up dollars for other needs.

We sat down with two members of the outstanding mortgage team at MetaBank – JoAnn Linn and Peter Jenkins – who shared some expert advice for those considering refinancing.

As we start 2020, what type of rate environment are you seeing with mortgages? And do you have any sense of where it is heading?

JoAnn Linn: Right now, we are seeing a favorable low-rate environment. As the year progresses into 2020, that trend looks to continue. If you have been thinking about refinancing but just haven’t been ready to start the process, you may want to take a closer look and take advantage of the low rates we are seeing. Even folks who closed as recent as 2018 are refinancing.

Obviously, every situation is unique, but what are some general guidelines for deciding whether I’m a good fit for refinancing?

JoAnn Linn: Everyone’s circumstance is different, so it’s important to think about why you’re considering refinancing. Your credit score, loan to value, income and the type of refinancing you’re considering will all factor in to how your loan is priced. And if you have extenuating circumstances such as medical bills that warrant a refinance, we can help you make the best choice in terms of how to structure your deal so you get the results you’re seeking. 

Does it make sense to refinance one 30-year mortgage for another 30-year? Or if you’re going to refinance, should you be looking at shortening the term?

Peter Jenkins: Those are good questions to discuss with your lender and your financial planner, but we have certainly seen people refinancing to both new 30-year and new 15-year loans. Here are some of the reasons you might go into a new 30-year loan:

• Better rate with a lower payment.
• A divorce situation where a spouse is being removed from the mortgage.
• A renovation or addition to the home that includes taking equity out of the mortgage to pay for the improvements.
• Debt consolidation.
• Investment into a business or rental property.

JoAnn Linn: It’s important to think about whether you’re trying to lower your rate by extending the length of your mortgage with something that equates to less than a 1 percent savings compared with your current rate. You then need to consider the implications of going back into a 30-year mortgage with the costs involved. Depending on how long you’ve been paying on your mortgage, you may inevitably increase the amount of interest you will pay over the life of the loan without significantly reducing your monthly payment. So you have to see if you’ve really gained anything by doing it.

If dropping your rate means it will take you 10 years to recoup your costs to complete the refinance, it’s not a great idea. However, if you can recoup your costs in less than five years and you see no move in your future, that would be a good time to refinance.

Essentially, if you can lower the length of your mortgage loan and afford the payment, there are big savings coming your way long term in how much interest you’ll pay over the life of the loan. Sometimes that bigger payment might be a bit of an adjustment, but take it from someone who did it seven years ago —  that maturity date coming up in eight years is looking pretty sweet!

What if I want to pay off my home sooner, but refinancing doesn’t make sense for me based on my current rate?

JoAnn Linn: If your goal is to pay off the home loan quicker and rates are the same or higher than your present rate, start making additional payments to your principal. One extra payment per year may take as much as seven years off the length of your loan. Or you can divide that payment by 12 and add that to additional principal payments each month.

Are there any special considerations for jumbo mortgages? Or second homes?

Peter Jenkins: There are some additional items that should be planned on and considered — things like additional funds saved in reserves, a change in rate options or possibly needing more money required for your down payment. The first step when looking at these options is to discuss with one of our lenders.

What if I have other debt like credit cards or an auto loan? Should I think about rolling that in when I refinance?

JoAnn Linn: If you have built up enough equity in your home and you can afford the new payments, then yes it could be a good option. Take a close look at the terms of the debt you are considering to roll in and decide if it makes sense to include them or maybe get a little more aggressive in your payments. If you are consolidating debt, it’s important to budget and change your spending habits to ensure you’re not in the same place again in two, three, five or 10 years and see your equity vanish. We can’t take for granted that real estate values will continue to rise at the level they have the past several years, and you will have that equity to rely upon. 

What if I’m not sure how long I plan to stay in my home? Should I consider refinancing anyway?

Peter Jenkins: We have some great tools to help you decide if it is still worthwhile to refinance. We can easily figure savings over shorter periods like three years as compared to 10 years to see if refinancing is still beneficial. Talk with your lender to see what the break-even point is.

How long does it typically take to complete a refinance?

Peter Jenkins: Most of the time, it’s up to the borrower and their goals on how long it takes. They typically range anywhere from 25 to 45 days.

I know someone who is getting a really low mortgage rate – better than what I was quoted. What causes rates to be different?

Peter Jenkins: There are many things that can affect your rate such as credit scores, loan programs and whether you are taking money out in a refinance. Most of the time, quoting a rate online doesn’t give you all the information. It’s best to talk to one of our lenders so you get accurate information right up front.

What makes the mortgage lending team at Meta uniquely positioned to help me?

JoAnn Linn: We have programs to fit a wide array of customers and situations. Every customer is a little different in their needs and wants. We sit down with you to find out what the best solution is and program to fit your end goal. In the end, it’s all about the customer, and we’re fortunate to have an experienced staff of employees to help you out. 

OK, I’m ready to move forward. What’s my next step?

JoAnn Linn: Stop by any location or call one of our mortgage lenders to start the process. You can reach me at 605-782-1745 or Peter at 605-782-1763. We also have options for applying online as well, making the refinance process even easier!

You can also visit us at our booth at the Sioux Empire Home Show at the Sioux Falls Convention Center Feb. 21-23. We have exciting news to share about upcoming mortgage promotions!