WEBVTT - To Refi or Not to Refi? #127 0:00:00.080 --> 0:00:03.040 Welcome to How to Money. I'm Joel and I am Matt, 0:00:03.200 --> 0:00:06.400 and today we are asking the question to refi or 0:00:06.480 --> 0:00:28.319 not to REFI, to refly or to not refive that 0:00:28.640 --> 0:00:32.000 just the question. I also had a hamletesque skull in 0:00:32.000 --> 0:00:34.479 my hand when I had that in a candle that 0:00:34.560 --> 0:00:37.640 was no longer lit in your other hand, exactly exactly, Man. 0:00:37.680 --> 0:00:40.160 I saw a recent report that on average, for folks 0:00:40.280 --> 0:00:43.360 who can refinance their home, that each individual could say 0:00:43.400 --> 0:00:46.800 about two and seventy dollars a month, totaling one point 0:00:46.880 --> 0:00:49.840 six billion dollars, which is a huge amount of money. 0:00:50.000 --> 0:00:52.680 So we're gonna talk about if you should be refinancing 0:00:52.720 --> 0:00:54.360 your home, and we're gonna talk about how to do 0:00:54.440 --> 0:00:56.480 that on this episode. Yeah, and there are some good 0:00:56.560 --> 0:00:57.920 rules of thumb. I think they will be able to 0:00:57.960 --> 0:01:00.320 offer folks. But but it's also very specific and gonna 0:01:00.320 --> 0:01:02.959 get into some of those specifics. But like you said, Matt, 0:01:03.000 --> 0:01:04.480 a lot of people could save a lot of money, 0:01:04.680 --> 0:01:07.120 and a lot of people either have heard or seen 0:01:07.160 --> 0:01:10.520 an article refinancing, like everyone's doing it right now. And yes, 0:01:10.560 --> 0:01:12.640 you should feel the peer pressure to at least consider it, 0:01:12.840 --> 0:01:16.360 even if you don't have a home. Consider refinancing. Yeah, 0:01:16.360 --> 0:01:18.800 we're gonna sell you that hard, you know, but refinancing 0:01:18.880 --> 0:01:20.840 is a good idea for a lot of folks. And 0:01:21.000 --> 0:01:22.560 if you're one of those folks who can save a 0:01:22.560 --> 0:01:24.720 ton of money every month by by doing a REFI 0:01:24.880 --> 0:01:27.959 I mean that's big news, sure is, man. But before 0:01:28.000 --> 0:01:30.280 we kick things off, I wanted to talk about going 0:01:30.360 --> 0:01:33.920 green or that zero waste lifestyle that you might see 0:01:34.200 --> 0:01:36.000 kind of cropping up here and there. I'll tell you 0:01:36.000 --> 0:01:38.600 what you do. One search for anything now on the Internet, 0:01:38.640 --> 0:01:40.400 and then before you know it, you're getting fed all 0:01:40.440 --> 0:01:44.600 these different ads, specifically for me Instagram. Anytime I google anything, 0:01:44.920 --> 0:01:47.240 three seconds later there's an ad for that very thing 0:01:47.440 --> 0:01:49.960 or a competing company popping up in my Instagram feed. 0:01:50.000 --> 0:01:52.640 And it is crazy. So evidently I searched something that 0:01:52.720 --> 0:01:54.840 made the algorithms think that I want to spend a 0:01:54.880 --> 0:01:57.880 bunch of money on these zero waste products because I'm 0:01:57.880 --> 0:02:01.760 getting fed things like these bees wax wraps. Have you 0:02:01.800 --> 0:02:04.680 seen these? I mean it's cloth and it's like confused 0:02:04.720 --> 0:02:07.800 with wax. And instead of using typer wear like use 0:02:07.840 --> 0:02:09.760 that you go to the butcher and you put your 0:02:09.840 --> 0:02:12.079 raw meat in this fabric and you take it home 0:02:12.520 --> 0:02:14.200 and then you wash it when you take the meat 0:02:14.200 --> 0:02:16.360 out of it, like that kind of stuff. I I 0:02:16.400 --> 0:02:20.040 actually just reuse plastic ziploc back. Yes, well, that's I 0:02:20.040 --> 0:02:21.760 think that's the real answer. That's why I want to 0:02:21.760 --> 0:02:24.440 talk about this is because so much of those products 0:02:24.800 --> 0:02:27.760 it's just marketing and it's consumption driven. It's it's so 0:02:27.800 --> 0:02:31.839 ironic that we're being fed these advertisements to buy these 0:02:31.880 --> 0:02:35.440 things that will miraculously allow us to become less wasteful, 0:02:35.520 --> 0:02:37.960 when in fact, that's sort of the epitome of waste, right, 0:02:38.040 --> 0:02:40.720 purchasing something that you don't really need because you already 0:02:40.720 --> 0:02:43.240 have some products that can actually provide that utility that 0:02:43.320 --> 0:02:45.800 you are truly needing. And I'm not saying that I'm 0:02:45.800 --> 0:02:47.640 immune to this either, right, Like I get sucked in 0:02:47.680 --> 0:02:50.519 the advertisements, Like I see the cool stainless steel straw, 0:02:50.680 --> 0:02:52.560 the drinking straw, and I kind of want that because 0:02:52.600 --> 0:02:54.120 I see it looks awesome. It looks like something I 0:02:54.120 --> 0:02:56.160 can keep in my pocket. And I like putting cool 0:02:56.200 --> 0:02:58.400 metallic things in my pocket. You know, like one of 0:02:58.400 --> 0:02:59.959 those I might be turning into one of those every 0:03:00.000 --> 0:03:01.040 to care you guys. You know, I got like my 0:03:01.080 --> 0:03:02.720 little pocket knife, Like what else can I fit my 0:03:02.720 --> 0:03:04.520 pockets that that might come in handy. If you get 0:03:04.560 --> 0:03:06.280 some cargo shorts, then you can do it even more, 0:03:06.880 --> 0:03:09.919 or cargo kilts. But I think a good challenge is to, 0:03:10.040 --> 0:03:12.040 instead of looking at the different products out there that 0:03:12.080 --> 0:03:14.600 will allow us to become something that we aspire to 0:03:14.680 --> 0:03:17.400 be in this case, like look at our actual waste, 0:03:17.440 --> 0:03:19.000 Like look in the trash can, what's going in the 0:03:19.040 --> 0:03:21.640 trash And by identifying those things, I think we can 0:03:21.680 --> 0:03:24.520 find ways that allow us to become less wasteful. And 0:03:24.520 --> 0:03:26.120 not to mention, on top of that, the things I 0:03:26.120 --> 0:03:28.880 think that oftentimes have a lot of packaging tend to 0:03:28.880 --> 0:03:31.239 cost more because they're the sort of like one time 0:03:31.320 --> 0:03:34.160 use things, or they're the convenience foods or products, and 0:03:34.160 --> 0:03:36.160 in reality, we could probably do with less of those 0:03:36.160 --> 0:03:39.320 products altogether. Yeah, Matt, and we talked with someone who's 0:03:39.360 --> 0:03:41.800 kind of an expert in this field. Back in episode 0:03:41.880 --> 0:03:45.520 number seventy two, we brought Katie Wolk Stanley on and 0:03:45.600 --> 0:03:48.160 she goes by the moniker on the internet, the non 0:03:48.200 --> 0:03:51.400 consumer Advocate, and the title of that episode was stopped 0:03:51.400 --> 0:03:54.280 buying new stuff, and Katie is is concerned with how 0:03:54.320 --> 0:03:56.480 we treat the earth and the things we waste and 0:03:56.520 --> 0:03:58.760 the money that we waste at the same time, and 0:03:58.800 --> 0:04:01.480 I think she would completely agree that buying new things 0:04:01.520 --> 0:04:04.360 in an attempt at becoming greener is just not the 0:04:04.400 --> 0:04:06.440 way to go about it. Really, the clutch move. The 0:04:06.440 --> 0:04:09.000 biggest thing that we could all do as human beings 0:04:09.120 --> 0:04:11.400 is to stop buying new stuff and focus instead on 0:04:11.440 --> 0:04:15.400 filling our homes or apartments wherever we live with used items, 0:04:15.440 --> 0:04:18.200 whether that's clothing, furniture, the car we drive. If we 0:04:18.240 --> 0:04:21.440 can prioritize buying used and holding onto those things longer, 0:04:21.839 --> 0:04:24.280 that's the biggest dent we can make in a culture 0:04:24.279 --> 0:04:27.480 that attempts to spur us on towards more and more consumption. 0:04:27.720 --> 0:04:30.599 And so yeah, I agree, don't buy into the advertisers. 0:04:30.600 --> 0:04:33.640 Don't think that you're becoming more green by buying more things. 0:04:33.640 --> 0:04:36.320 Shifting our mindset of what it takes to be a 0:04:36.360 --> 0:04:40.520 greener individual in the society, I mean, that's that's the key. Yeah, Yeah, 0:04:40.560 --> 0:04:42.800 that's so true. Man, That's that's a great challenge for us, 0:04:42.839 --> 0:04:44.919 something that we can implement in our lives. I guess, 0:04:45.080 --> 0:04:47.159 you know, you just see so many things in our 0:04:47.200 --> 0:04:50.279 world that oftentimes seems silly, and sometimes when you actually 0:04:50.279 --> 0:04:52.240 see it for what it is, it can kind of 0:04:52.279 --> 0:04:54.839 be darwing almost right, Like I'm thinking specifically too, of 0:04:54.880 --> 0:04:56.920 like the fancy water bottles. I'm not going to name 0:04:56.960 --> 0:04:58.720 any of the name brand ones out there, but they're 0:04:58.720 --> 0:05:01.760 really expensive, like the stellated you know, bigger water bottles. 0:05:02.200 --> 0:05:04.240 And again, there's nothing wrong with getting one of those 0:05:04.240 --> 0:05:05.680 water bottles if you're going to use it, and so 0:05:05.760 --> 0:05:07.400 literally there's a hole in it, right, but if you're 0:05:07.400 --> 0:05:09.119 getting one of those because you don't want your plastic 0:05:09.160 --> 0:05:11.839 bottles to end up in a landfill, but in reality, 0:05:11.920 --> 0:05:14.719 you're buying a new one of those water bottles maybe 0:05:14.720 --> 0:05:16.600 every six months, right, You're like you're getting the new, 0:05:16.680 --> 0:05:18.800 latest and greatest color, or there's a new model that 0:05:18.839 --> 0:05:20.960 actually does this. I think it's just important for us 0:05:20.960 --> 0:05:22.840 to realize that we're being marketed to and that we're 0:05:22.880 --> 0:05:25.599 being sold these products that are a not making us 0:05:25.640 --> 0:05:28.200 any happier, be that they're costing us a lot of money, 0:05:28.240 --> 0:05:30.560 and and see in reality they may not be helping 0:05:30.600 --> 0:05:33.200 with waste and pollution. Yeah, as you brought this up, 0:05:33.200 --> 0:05:35.960 it kind of made me think about energy efficiency too, 0:05:36.400 --> 0:05:39.000 and So let's say new TVs or new refrigerators use 0:05:39.040 --> 0:05:41.960 a whole lot less energy than their predecessors of ten 0:05:42.040 --> 0:05:44.200 years ago. That's great, And if you're one of those 0:05:44.200 --> 0:05:46.680 folks that needs a new refrigerator soon or a new TV, 0:05:47.040 --> 0:05:49.119 that's gonna save you every month on your energy bills. 0:05:49.279 --> 0:05:52.800 But just because that new TV uses fifty less energy 0:05:52.839 --> 0:05:55.599 than the one you currently have, that certainly doesn't mean 0:05:55.640 --> 0:05:58.560 you should go to your local best Buy or go 0:05:58.640 --> 0:06:01.680 to Amazon whatever buy a new TV right now. That's 0:06:01.680 --> 0:06:03.840 just faulty logic. And I think the same thing is 0:06:03.880 --> 0:06:06.560 true for the kind of the green product movement. Some 0:06:06.640 --> 0:06:09.120 of those things can potentially be helpful. So yeah, just 0:06:09.160 --> 0:06:12.560 like you wouldn't buy new TV to save eight dollars 0:06:12.560 --> 0:06:15.440 a year in electricity, you also shouldn't assume that buying 0:06:15.520 --> 0:06:18.440 products that are marketed as green and great for the 0:06:18.480 --> 0:06:21.800 earth are instantly helping you to waste less. Yeah, and 0:06:21.839 --> 0:06:23.919 Joel all that to say, I mean, we're not against 0:06:24.000 --> 0:06:25.960 products that are better for the earth, right Like, we 0:06:26.040 --> 0:06:28.159 love the earth, we like there to be less waste 0:06:28.200 --> 0:06:29.640 in the world. But we just want you to be 0:06:29.720 --> 0:06:31.240 to be smart about it and to take it back 0:06:31.240 --> 0:06:34.000 to our friend Katie. She has her motto or her slogan, 0:06:34.040 --> 0:06:36.680 which is use it up, wear it out, make it 0:06:36.720 --> 0:06:39.920 do or do without. Make sure to keep that in mind. Cool, Matt, 0:06:39.920 --> 0:06:41.640 All right, let's mention the beer that we're having on 0:06:41.680 --> 0:06:45.159 the show today. We're drinking Old Toffy and it's brewed 0:06:45.160 --> 0:06:47.480 by New Belgium Brewing at a Colorado. This is a 0:06:47.560 --> 0:06:50.520 Logger beer sent to us by listener Maggie. So, Maggie, 0:06:50.560 --> 0:06:52.120 thanks for sending this one our way. Yeah, and it's 0:06:52.120 --> 0:06:54.359 worth mentioning. Joel, you said Old Toffie, this is the 0:06:54.400 --> 0:06:56.800 mascot for NC State, and she certainly picked a beer 0:06:56.800 --> 0:06:58.960 that she has a vested interest with because she is 0:06:59.000 --> 0:07:01.240 actually a professor there at NC State. So I just 0:07:01.240 --> 0:07:03.240 wanted to mention that you and I have no collegiate 0:07:03.240 --> 0:07:05.560 ties necessarily it to NC State. I'm sure a second, 0:07:05.560 --> 0:07:07.000 not gonna let this beer go to waste, and we're 0:07:07.000 --> 0:07:08.600 gonna enjoy this one and share our thoughts at the 0:07:08.680 --> 0:07:10.640 end of the episode. Yeah. I have a feeling though, 0:07:10.640 --> 0:07:12.760 that they're going to contact us pretty shortly for honorary 0:07:12.840 --> 0:07:15.160 doctorates or something like that, so then we will have 0:07:15.200 --> 0:07:16.800 ties to the institution. How do you even get one 0:07:16.800 --> 0:07:18.520 of those an honorary degree. Do you have to be 0:07:18.520 --> 0:07:20.600 invited to give the speech at the at the end 0:07:20.600 --> 0:07:22.520 of the year, the commencement end of the year's sort 0:07:22.520 --> 0:07:24.520 of speech there at graduation? You know, I don't know 0:07:24.560 --> 0:07:25.960 how you do it. I assume it's similar to the 0:07:25.960 --> 0:07:28.680 way you get united in in England and it's just 0:07:28.760 --> 0:07:30.840 kind of one of those rare things that happened. But 0:07:30.880 --> 0:07:32.960 the fact that we featured their beer on our show, 0:07:32.960 --> 0:07:34.360 I mean, they're totally going to do it for us. 0:07:34.400 --> 0:07:36.280 I think Dr Matt has a nice ring to it. 0:07:36.840 --> 0:07:39.960 Dr Joel, great to see you today. All right, Matt, 0:07:40.000 --> 0:07:42.200 let's get onto the topic at a hand. Today we're 0:07:42.240 --> 0:07:45.080 asking the question to refin or not to refy, And 0:07:45.160 --> 0:07:47.920 basically we're in a refinance boom right now. Taking the 0:07:47.960 --> 0:07:51.080 advantage of a refi on your house can lower your 0:07:51.160 --> 0:07:54.280 interest rate and lower your monthly payments. But there are 0:07:54.280 --> 0:07:57.520 also costs involved in refinancing that can make it prohibitive, 0:07:57.880 --> 0:08:01.160 and not everyone is a good candidate to refinance. So 0:08:01.320 --> 0:08:03.160 is it the right move for you? Well, Matt and 0:08:03.200 --> 0:08:05.400 I were going to discuss what you need to consider 0:08:05.440 --> 0:08:08.720 and how to make sure you're refinancing effectively if you 0:08:08.760 --> 0:08:10.680 decide to go through with it. Yeah, joint to quickly 0:08:10.720 --> 0:08:12.600 sort of lay the groundwork right as to what a 0:08:12.640 --> 0:08:15.640 refinance is. Essentially, you're finding a new lender, and that 0:08:15.680 --> 0:08:17.640 new lender, once you move forward with them, they are 0:08:17.640 --> 0:08:20.560 going to pay off your current loan, and then you 0:08:20.560 --> 0:08:22.080 have a new loan with that new lender, and your 0:08:22.080 --> 0:08:25.200 payments go to them. Hopefully you have a lower interest rate. 0:08:25.280 --> 0:08:27.960 Oftentimes you're gonna have a different length of time, right, 0:08:28.040 --> 0:08:30.880 a different term once that refinance is complete. And so 0:08:30.920 --> 0:08:33.200 first let's talk about the why. Let's go over some 0:08:33.240 --> 0:08:36.560 of the sort of overarching guiding principles of why you 0:08:36.640 --> 0:08:38.600 might want to refinance. And you all, we kind of 0:08:38.600 --> 0:08:41.480 touched on this a second ago, but oftentimes folks refinance 0:08:41.679 --> 0:08:44.360 in order to lower their monthly mortgage payment. So by 0:08:44.360 --> 0:08:47.000 lowering your rate, you can potentially lower your monthly payments 0:08:47.200 --> 0:08:49.960 and give yourself a little more financial breathing room, just 0:08:50.000 --> 0:08:52.240 a little bit more margin in your life. But that 0:08:52.320 --> 0:08:56.920 being said, that is not our favorite reason to actually refinance. Yeah, 0:08:56.920 --> 0:08:59.760 the best reason to consider doing a refinance on your 0:08:59.760 --> 0:09:03.000 house is to save money on overall interest paid over 0:09:03.080 --> 0:09:05.800 the life of your loan. This is the even more 0:09:05.920 --> 0:09:08.240 important reason to consider a refight. It's going to have 0:09:08.360 --> 0:09:11.880 a bigger overall impact on your finances. Yeah, Jill, both 0:09:11.880 --> 0:09:14.080 of those are good reasons right to refinance. But the 0:09:14.160 --> 0:09:16.320 idea of sort of stepping back and looking at the 0:09:16.360 --> 0:09:18.800 total cost, the total amount that you're gonna pay for 0:09:19.080 --> 0:09:21.040 financing your home. The idea there is to be able 0:09:21.040 --> 0:09:22.719 to step back a little bit and to not just 0:09:22.840 --> 0:09:25.760 focus on making payments, not just seeing how much house 0:09:25.800 --> 0:09:28.280 you can afford month to month. It's essentially more of 0:09:28.280 --> 0:09:32.000 a holistic, sort of bird's eye view of your overall finances. Yeah. 0:09:32.000 --> 0:09:34.080 I mean, just like we would recommend when someone's buying 0:09:34.080 --> 0:09:35.960 a car, well, you don't want to finance it over 0:09:36.000 --> 0:09:37.760 seven years. Sure it's going to give you a lower 0:09:37.800 --> 0:09:39.840 monthly payment, but that's not the biggest thing you want 0:09:39.880 --> 0:09:42.320 to take into consideration. In the United States of America, 0:09:42.440 --> 0:09:46.280 we've kind of become payment buyers, and for only considering 0:09:46.320 --> 0:09:49.320 the actual outgoing number every month and not that holistic 0:09:49.360 --> 0:09:51.400 overall picture, it's going to lead us to make some 0:09:51.480 --> 0:09:54.160 poor decisions. So, just like with buying that car, you 0:09:54.200 --> 0:09:57.160 don't want to refinance your house just to get a 0:09:57.160 --> 0:09:59.800 lower monthly payment, although that could be a nice side 0:09:59.800 --> 0:10:02.040 ben Fit and Joe, you know what, to refinance? It 0:10:02.040 --> 0:10:04.319 costs money, right, it costs a lot of money. Because 0:10:04.360 --> 0:10:06.200 it does cost so much, there are a number of 0:10:06.200 --> 0:10:08.520 things that you want to consider. One of the things 0:10:08.520 --> 0:10:10.920 you want to consider is how long you'll actually own 0:10:11.000 --> 0:10:12.959 that home. If you think you might only be there 0:10:12.960 --> 0:10:15.800 for another a year or two, it's probably a bad 0:10:15.840 --> 0:10:17.160 idea for you. It's not gonna make a whole lot 0:10:17.160 --> 0:10:19.800 of sense because you'll never make up that money that 0:10:19.840 --> 0:10:22.320 you spent on those closing costs in the amount of 0:10:22.320 --> 0:10:24.400 money that you're gonna be able to save every single month. 0:10:24.720 --> 0:10:26.200 But then maybe on the other end of the spectrum, 0:10:26.240 --> 0:10:27.840 let's say you're gonna be there for like, say, at 0:10:27.960 --> 0:10:30.839 least ten years, Well, for you, it's likely going to 0:10:30.880 --> 0:10:32.800 be a pretty good move, right. It's it's not a 0:10:32.800 --> 0:10:35.199 matter of if you'll be able to earn that money back, 0:10:35.240 --> 0:10:37.640 but just when. Yeah. Good rule of thumb is a 0:10:37.720 --> 0:10:40.080 thirty month rule. So if you run the numbers and 0:10:40.120 --> 0:10:43.319 you will break even, And because the savings of your 0:10:43.320 --> 0:10:46.600 new loan and lower interest rate, you'll break even versus 0:10:46.640 --> 0:10:49.720 the cost you incurred in order to make this REFI happen, well, 0:10:49.760 --> 0:10:51.600 then likely it's a good idea for you to do 0:10:51.640 --> 0:10:54.360 the refi. It's so incredibly rare for someone to stay 0:10:54.400 --> 0:10:57.040 in their house for an entire thirty year mortgage term, 0:10:57.120 --> 0:10:59.560 right that that almost never happens. And so really it 0:10:59.600 --> 0:11:01.760 comes down so how long you're planning on being in 0:11:01.760 --> 0:11:04.880 the house. Obviously, things can happen and life doesn't always 0:11:04.880 --> 0:11:06.640 work out the way we think it's going to, but 0:11:06.679 --> 0:11:08.880 it's important for you to assess how long do I 0:11:08.960 --> 0:11:10.680 think I will be in this home? And if you 0:11:10.679 --> 0:11:12.160 think you will be in the home for quite a 0:11:12.160 --> 0:11:14.120 while and the math works out in regard to that 0:11:14.120 --> 0:11:16.920 thirty month break even point, well, then refinancing can make 0:11:16.960 --> 0:11:18.839 a whole lot of sense. So next we're gonna cover 0:11:18.960 --> 0:11:21.520 some of the specific considerations that you want to keep 0:11:21.520 --> 0:11:24.160 in mind as you are deciding whether or not you 0:11:24.200 --> 0:11:26.599 should refinance. We're gonna get to those right after the 0:11:26.640 --> 0:11:37.240 break all right, man, We're gonna get to some of 0:11:37.240 --> 0:11:40.199 those specific factors that are really helpful as you are 0:11:40.280 --> 0:11:43.320 working through whether or not you should be refinancing. And honestly, 0:11:43.360 --> 0:11:46.000 it's a question on so many people's minds because mortgage 0:11:46.040 --> 0:11:48.640 rates are near all time loads again, and they've really 0:11:48.679 --> 0:11:51.360 plummeted over the last year. And I feel like, as 0:11:51.360 --> 0:11:54.640 we're asking ourselves this question, should we be refinancing? This 0:11:54.720 --> 0:11:57.600 is an instance where analysis paralysis can keep you from 0:11:57.640 --> 0:12:00.559 taking advantage of uber low rates. The bottom line is 0:12:00.600 --> 0:12:03.640 that nobody knows where rates are going, but they're currently 0:12:03.679 --> 0:12:07.280 incredibly low. So right now is a specific time where 0:12:07.400 --> 0:12:10.360 a lot of people should be considering refinancing. So is 0:12:10.360 --> 0:12:12.800 now the right time? Well, it could be, and Matt, 0:12:12.880 --> 0:12:15.320 let's talk about the specific factors that will help you 0:12:15.400 --> 0:12:18.200 determine whether or not it's the right time for you. Yeah. Well, 0:12:18.200 --> 0:12:20.200 first I wanted to address if someone is listening to 0:12:20.200 --> 0:12:22.320 this episode and they happen to be listening, say six 0:12:22.360 --> 0:12:24.520 months later, and you're thinking, dang it, like I totally 0:12:24.520 --> 0:12:27.280 missed the train on refinancing. Well, there's two things that 0:12:27.320 --> 0:12:29.480 you can do. First, you can look at a graph 0:12:29.559 --> 0:12:31.800 and you can see where rates currently are as you 0:12:31.800 --> 0:12:34.280 are listening to this episode. And you can probably zoom 0:12:34.320 --> 0:12:35.520 out a little bit and look at the past couple 0:12:35.559 --> 0:12:38.080 of years and see rates are still historically low. You know, 0:12:38.120 --> 0:12:40.080 we are still in a great spot even if they're 0:12:40.120 --> 0:12:42.120 not the lows they've ever been exactly could still be 0:12:42.160 --> 0:12:44.960 really good. And secondly, we would recommend that you look 0:12:45.080 --> 0:12:47.720 at the mortgage rate that you currently have right now, 0:12:47.880 --> 0:12:50.520 because it doesn't really matter if rates were historically low 0:12:50.559 --> 0:12:52.240 and you kind of missed that boat. If the current 0:12:52.240 --> 0:12:55.360 market rates are significantly lower than the rate that you 0:12:55.480 --> 0:12:58.720 currently have, then you should still really consider a refinance. 0:12:58.760 --> 0:13:00.280 You're gonna want to dig a little bit de peper, 0:13:00.360 --> 0:13:03.760 specifically into your own finances, all right, So let's talk 0:13:03.760 --> 0:13:07.160 about those specific things that people should be considering before 0:13:07.200 --> 0:13:09.920 they decided to actually get going and make a refi happen. 0:13:10.240 --> 0:13:12.839 Even though mortgage rates are insanely low, that doesn't mean 0:13:12.840 --> 0:13:15.360 that it's a no brainer for you to refinance before 0:13:15.400 --> 0:13:17.480 you actually do it. Here are the main factors you 0:13:17.520 --> 0:13:20.040 need to consider to know whether you're a good candidate 0:13:20.120 --> 0:13:22.720 or not. The first thing is to know your credit score. 0:13:23.000 --> 0:13:26.760 To qualify for the lowest of mortgage rates, you're gonna 0:13:26.760 --> 0:13:29.559 need a really solid credit score, and that means typically 0:13:29.600 --> 0:13:32.480 in the range of seven seven forty. If you're above 0:13:32.800 --> 0:13:35.840 seven twenty, in all likelihood with most lenders, you're going 0:13:35.880 --> 0:13:38.160 to get the best rate that they offer. Some lenders 0:13:38.200 --> 0:13:40.160 might have a threshold of seven forty, but if you're 0:13:40.160 --> 0:13:41.880 in that range, you know that you'll be able to 0:13:41.920 --> 0:13:44.199 get a really good rate. And if you don't know 0:13:44.320 --> 0:13:47.160 what your credit score is, well, we've talked about multiple 0:13:47.160 --> 0:13:49.400 resources for you. Go check that out. Your current credit 0:13:49.400 --> 0:13:52.440 card company might offer that every month. If not, credit 0:13:52.440 --> 0:13:54.480 scorecard dot Com is a great tool, and so is 0:13:54.520 --> 0:13:57.440 credit Karma. Basically, if refinancing is on your radar, you 0:13:57.440 --> 0:13:59.439 need to know your credit score because that is going 0:13:59.480 --> 0:14:02.199 to have a huge impact on whether or not it's 0:14:02.200 --> 0:14:04.680 gonna make sense for you. Ye dull, you know. The 0:14:04.720 --> 0:14:07.000 size of that impact is going to depend on a 0:14:07.000 --> 0:14:09.360 lot of different things. But for instance, let's just say 0:14:09.400 --> 0:14:11.320 you had a hundred point drop in your credit score 0:14:11.360 --> 0:14:13.920 from seven forty maybe down to six forty. That score 0:14:14.080 --> 0:14:16.520 is gonna cost you anywhere between like sixty and eighty 0:14:16.520 --> 0:14:18.880 bucks a month on a median home in the US. 0:14:19.160 --> 0:14:21.040 And that doesn't sound like much, right, You think sixty bucks, 0:14:21.080 --> 0:14:22.520 that's not that big of a deal, But over the 0:14:22.560 --> 0:14:25.240 course of the loan, that's over twenty five dollars that 0:14:25.280 --> 0:14:27.160 you're gonna be paying just for having a credit score 0:14:27.200 --> 0:14:29.600 that got busted up a little bit. Before you're refinanced. 0:14:29.720 --> 0:14:31.440 All Right, Another factor that you want to keep in 0:14:31.480 --> 0:14:33.880 mind when you are considering if you're a good candidate 0:14:33.920 --> 0:14:36.400 for a refinance or if your house actually is a 0:14:36.400 --> 0:14:39.360 good candidate to be refinanced, right, is equity and real 0:14:39.480 --> 0:14:41.960 quick equity is just the market value of your home 0:14:42.160 --> 0:14:44.040 less the amount that you owe on it. And if 0:14:44.040 --> 0:14:46.920 you have less than equity in your home, a conventional 0:14:47.000 --> 0:14:50.400 loan refinance is likely not going to be possible for you. 0:14:50.600 --> 0:14:52.760 And so if you don't have enough equity, bringing cash 0:14:52.800 --> 0:14:54.840 to the closing table can actually help you to get 0:14:54.880 --> 0:14:57.480 a conventional loan. Well, it's not impossible, but you're gonna 0:14:57.480 --> 0:15:00.440 be paying private mortgage insurance right p m I, which 0:15:00.480 --> 0:15:04.000 is a p I T A so many abbreviations on 0:15:04.040 --> 0:15:06.240 this episode, right, So keep in mind though that if 0:15:06.240 --> 0:15:09.000 you don't have enough equity, you can bring cash to 0:15:09.000 --> 0:15:10.880 the closing table and that can help you to get 0:15:10.880 --> 0:15:14.160 a conventional loan at a great rate without p m I. 0:15:14.520 --> 0:15:17.480 Another but maybe similar scenario is if the value of 0:15:17.520 --> 0:15:19.480 your home has gone up since you purchased it. Well, 0:15:19.560 --> 0:15:21.720 guess what if you didn't have enough equity initially when 0:15:21.720 --> 0:15:23.720 you purchased it, but the value of your home has 0:15:23.760 --> 0:15:25.400 gone up. Well, in that case, you don't have to 0:15:25.400 --> 0:15:28.400 come to the table with additional funds. Are Another thing 0:15:28.480 --> 0:15:31.520 you're going to need to know in advance of pulling 0:15:31.520 --> 0:15:34.400 the trigger on a refinance is your d T I ratio. 0:15:34.520 --> 0:15:37.520 That's debt to income. Knowing your debt to income ratio 0:15:37.840 --> 0:15:40.840 is a crucial factor in qualifying for a loan. Lenders 0:15:40.840 --> 0:15:42.440 are going to look at you if you have a 0:15:42.520 --> 0:15:46.600 debt to income ratio of more than forty and your 0:15:46.800 --> 0:15:49.040 debt to income ratio you can find that out by 0:15:49.120 --> 0:15:52.280 dividing your monthly debt payments by your gross monthly income. 0:15:52.560 --> 0:15:55.440 That number is the way that lenders measure your ability 0:15:55.480 --> 0:15:57.560 to be able to repay your loan. So the lower 0:15:57.600 --> 0:16:00.480 your debt to income ratio is, the more favorable you look, 0:16:00.680 --> 0:16:03.240 which means they're happy to lend you money. Yeah, you know, 0:16:03.280 --> 0:16:05.720 calculating your debt to income ratio. That's not tricky math, right, 0:16:05.720 --> 0:16:08.080 You're just kind of making a calculation. But you do 0:16:08.080 --> 0:16:09.880 want to make sure that you are getting accurate numbers 0:16:09.880 --> 0:16:12.440 in there. And so when you are calculating your debt payments, 0:16:12.640 --> 0:16:15.560 you want to calculate everything. We're talking student loans, credit card, debt, 0:16:16.000 --> 0:16:18.200 car payment, any debt that you owe, any payment that 0:16:18.240 --> 0:16:20.080 you have that needs to go into your total debt 0:16:20.160 --> 0:16:22.320 number in order for you to get an accurate debt 0:16:22.360 --> 0:16:25.120 to income ratio. All right, Matt, Now let's get into 0:16:25.360 --> 0:16:29.000 some of the specific good reasons to refinance. We talked 0:16:29.000 --> 0:16:30.960 about the big picture that it's helpful to lower your 0:16:30.960 --> 0:16:33.960 monthly payments. It's even more helpful to save in overall 0:16:34.000 --> 0:16:37.040 interest paid over the years. But additionally, let's say you're 0:16:37.120 --> 0:16:40.160 in an ARM an adjustable rate mortgage. Well, considering we 0:16:40.240 --> 0:16:42.840 just talked about the fact that we're at historic low rates, 0:16:43.160 --> 0:16:46.720 the likelihood of your interest rate going up on your 0:16:46.720 --> 0:16:51.000 adjustable rate mortgage is decently high because as rates fluctuate 0:16:51.280 --> 0:16:55.440 ultimately over the years, they are barring something catastrophic going 0:16:55.480 --> 0:16:58.120 to rise. So getting out of an arm getting out 0:16:58.160 --> 0:17:00.760 of an adjustable or mortgage and into a fixed term 0:17:00.880 --> 0:17:02.400 makes a whole lot of sense for a lot of folks, 0:17:02.520 --> 0:17:04.159 especially if you're going to be in the house for 0:17:04.240 --> 0:17:06.919 quite a while. All Right. Another good potential reason to 0:17:07.000 --> 0:17:08.960 get a refi is if you can knock out some 0:17:09.040 --> 0:17:11.040 p m I. If you're able to get rid of 0:17:11.119 --> 0:17:13.879 private Morgan insurance while at the same time securing a 0:17:13.880 --> 0:17:16.399 lower rate, so that would end up saving you, you know, 0:17:16.480 --> 0:17:19.159 twofold in the long run, then you definitely want to 0:17:19.160 --> 0:17:22.119 consider p m I. On a typical two home, you 0:17:22.119 --> 0:17:24.600 could be paying anywhere between one d two hundred bucks 0:17:24.640 --> 0:17:26.680 a month and p m I, and so you get 0:17:26.760 --> 0:17:28.480 enough equity in the home to where you no longer 0:17:28.560 --> 0:17:30.680 have to pay that. Yet your lender has to stop 0:17:30.760 --> 0:17:32.439