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Homestead Financial Mortgage

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Is Now a Good Time to Refinance my Home Loan?

Homeowners often ask if it is a good time to refinance their home loan. The answer is certainly yes.  In fact, interest rates are at their lowest levels since 1958 when Dwight D. Eisenhower was president.  Since interest rates are extremely low, this gives tremendous opportunity to credit worthy consumers to take advantage of a refinance home loan.

Purposes of a Refinance

When doing a home loan refinance, a homeowner can apply for a “rate term refinance” or a “cash out refinance”.  These are the two main types of home loan refinances.   A “rate term” home loan refinance is a loan that involves a new home loan with a lower interest rate or lower repayment term, and generally a lower house payment.  A “cash out refinance” is a home equity loan that involves a new loan with a lower interest rate that includes cash out.  The “cash out” that is included in the new lower rate home loan can be used for such things as paying off credit card debt, home improvement, paying college tuition, paying off bills, or just cash out in general for the homeowner to use however they want.

Other Benefits of a Using Mortgage Financing

Another very important aspect of a home loan is that the interest paid is tax deductible.  Many years ago, the interest paid on other types of loans such as credit card and car loans was tax deductible.  Not any longer.  However, the interest paid on a home loan is still tax deductible.  This allows a homeowner to use their home equity to pay off other loans and have the interest paid under a tax deductible loan structure.  For instance, if a homeowner does a refinance and includes “cash out” in the new overall loan to pay off some credit cards or get money for home improvement, it then becomes tax deductible since it is included in their new house loan payment.  This is a great benefit for all homeowners to take advantage of.

Historically, this is a great opportunity for a homeowner to take advantage of the low interest rates available.  Using the tax deductibility of a home loan to pay off credit cards, home improvement, or other debt with rates being so low gives the consumer an opportunity to pay their overall debt off much quicker.