It’s September, and we know the last thing you want to think about is the holidays. But with the average American dropping $830 on Christmas gifts for their friends and family, now is the perfect time to think about how you’ll fit that into your budget.
So, exactly how can refinancing your home beef up your holiday shopping budget at just the right time?
It’s the Most Wonderful Time of the Year…to Refinance
NLC Loans first opened in 2003, and in the years since we’ve been in business, we’ve noticed a very obvious– and very interesting–trend: the number of homeowners who refinance always increases sharply in the fall. Right now, rates are at historical lows, which makes this the ideal time to refinance your mortgage anyway. But even when rates were higher, the number of refinance transactions we handle always hits its highest point for the year during the months of September, October, and November.
What Would You Do if You Didn’t Have to Pay Your Mortgage Payment this Month?
One of the most common reasons homeowners enjoy refinancing in the autumn months is because during the refinance process, they get to enjoy at least one month without having to pay their mortgage payment. As we mentioned above, the average American spends about $830 on Christmas and other winter holiday presents for their family and friends. The average American mortgage payment is just under $1,100, and it’s no coincidence that it’s almost an even trade for that monthly payment and the typical holiday shopping list.
Homeowners seem to naturally want to take advantage of a payment-free month courtesy of refinancing during the months leading up to the winter holiday season. It’s not a bad strategy to have, considering the many benefits of refinancing that reach far and above just putting this month’s mortgage payment back into their pockets.
The Benefits of Refinancing
Sure–letting your refinance foot the bill (so to speak) for your holiday gift list is a pretty big benefit in and of itself. However, there are other even better perks to refinancing your home.
Lower Your Interest Rate & Monthly Payment
The most common reason to refinance your home is to take advantage of a lower interest rate than you currently have on your mortgage. Mortgage rates are still near all-time lows, so even if you only bought your home a few years ago, now might be a great time to take advantage of lower rates and, naturally, lower monthly payments.
Pay Off Higher Interest Credit Cards
Using your equity to pay off credit card debt– or even other debts such as student loans or medical bills–can be a great way to consolidate debts down to one affordable monthly payment with a much lower rate of interest (for example, the average credit card has an interest rate of 15%–so by paying off credit cards with your home’s equity, you not only eliminate the extra monthly bills, but you get to take advantage of single digit interest rates instead of paying those high credit card interest rates). This will save you money not only right away, but in the long run as you’ll be paying much less in interest.
Cash Out Your Equity and Save for College, Retirement, Emergency Preparation Funds, or Home Improvements
Your home’s equity can also be cashed out and used to save for college tuition for the kids, retirement accounts, emergency funds, or even to pay for home improvements. This works especially well if your home’s value is higher than it was when you purchased your home–and since many of America’s home markets are booming, this is something many homeowners are currently experiencing.
Pay Off Your Mortgage Faster and Pay Less Interest
Reducing your mortgage term is another great way that refinancing your home can help you save money in the long run. Shorter mortgage terms– say, reducing your term from a 30 year to a 20 year– have lower interest rates on average, and thus less interest is paid over the life of the loan. Many people are surprised to see that the monthly payments on mortgages with terms of less than the usual 30 years are still quite affordable.
Reduce or Eliminate Your Mortgage Insurance Premiums
If you paid less than 20% down on your home, or if you got an FHA mortgage before 2015, you might be paying too much for your monthly mortgage insurance premiums. FHA insurance premiums are now less than they were even a few years ago, so refinancing can allow you to take advantage of the lower rates and insurance payments that are added to your mortgage payments each month. If you have reached–or are near reaching– 20% equity on your home (either due to accumulated principle or increased property value), you might also be able to eliminate your monthly mortgage insurance premiums.
The Bottom Line
The holiday season is looming, so now is a great time to refinance if you’ve been thinking of it. With all the benefits that refinancing brings–plus the ability to put off one month of your mortgage payment to cover the cost of your holiday gift list–there is no better time than now. Talk to a Personal Mortgage Advisor today by calling (toll free) 877-480-8050 for a no-strings mortgage evaluation and see how much you could save by refinancing your home now– and get your kids’ Christmas present list checked off early this year to avoid stress. Or, if you’re ready to get the ball rolling, get pre-qualified to refinance today and you’ll feel pretty jolly this holiday season!