Millions of homeowners refinanced their mortgages during the height of the pandemic in 2020, taking advantage of record-low rates and favorable terms to save significant amounts of money. With rates around 3% or less, it was a historic time for borrowers to refinance.
Since then, however, rates have increased for both fixed 30-year and 20-year rate terms,.
With that being said, rates are still relatively low compared to past decades. And for many borrowers,.
But what about seniors? Is mortgage refinancing worth it for older adults, many of whom may be on tight budgets? As with most financial considerations, the answer to this question is usually tied to one’s personal circumstances and goals. There are a few reliable ways to determine if it’s right for you.
Start by answering a few simple questions to see what rate you qualify for.
Should Seniors Refinance Their Mortgages?
A mortgage refinance, when done right, can be a boost to your personal finances. Here are three situations when it may be appropriate for seniors to refinance:
When they can lower their interest rates
If you can secure a rate a full percentage point lower than what you currently have. However, for some borrowers, even half a point may be worth it. Compare your current rate with what is available from your lender and other lenders in the market and see if it makes sense to work.
Just remember that mortgage refinancing also comes with its own. So make sure you plan to stay in your home long enough to recoup those costs.
Click here to see what refi rate you qualify for or use the calculator below to crunch the numbers.
When they can pay off their mortgage early
A mortgage refinance can save you money each month by lowering your interest rate. But it can save you money in the long run by allowing you to pay off your mortgage in less time than you initially agreed to. While this may not save you money on a monthly basis (in fact, it will likely increase your mortgage payment), it will save you substantial amounts over the years. Because you won’t pay interest for that extra year.
Another benefit: Once the mortgage is paid off you free up cash to spend elsewhere as needed.
So, for homeowners who want to save long-term interest — and who want to put more money back in their pocket as quickly as possible — then a mortgage refinance loan can be useful.
When they may need extra cash
For older homeowners, aCan provide significant amounts of cash. It’s easy to do, too. Simply take out a new loan for an amount higher than what you currently owe (the amount you apply for is at your discretion). From there you pay off the old loan balance with the new loan and pocket the difference for you as cash.
A(which is only available to adults over age 62) can also be a way to access home equity without completing a traditional refinance.
While these two options don’t come with the same benefits as traditional mortgage refinancing, they’re still options worth pursuing, especially if your cash flow has suffered during recent inflation.
See what your cash-out refinancing options are now here or start exploring a reverse mortgage.
Mortgage refinancing is not as favorable as in the recent past. But that doesn’t mean it’s still not worthwhile. Especially for seniors, many of whom may be on a tight budget, it can make sense if they can lower their interest rates or accelerate their loan repayments. Cash-out refinancing and reverse mortgages, meanwhile, can serve as valuable cash alternatives.