A few weeks ago, I posted about our myCUmortgage Monsterverse, which was titled All in the Family. If you missed it, I recommend you give it a read, as it is both fun and full of insight on how the monsters help our partners become GREAT mortgage lenders. Plus, it’s a great introduction to the newest member of the Monsterverse, Marv the Mover, Shaker, Mortgage Maker!
Over the past few months, Marv has been hanging out around the myCUmortgage offices so that he can learn the business and interact with our mortgage experts. In his free time, he likes to make his way down to my spaceship and hang out with “Uncle” Mort. Don’t get me wrong, I love having the little guy around, but as of late, Marv’s been requesting extended stays and sleepovers. As an alien who has spent most of his life living solo in the quiet depths of outer space, these overnight visits are wreaking havoc on my sleeping patterns, oftentimes <yawn>… leading… to…
Zzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzzz.
Sorry about that. Just an unplanned demonstration of living with a real mover and shaker. Lately, I’ve been looking at options for a more peaceful cohabitation, and I believe I’ve found a solution. I overheard some of my colleagues talking about the expansion of their current domiciles through various add-ons and renovations. Extending the living space through all‑season rooms and elaborate decks, knocking down walls and reconfiguring interior floor plans, and upgrading bathroom set‑ups to incorporate more amenities. All of this got me thinking – what kind of changes or additions could I make to my ship so that Marv and I can live in peaceful harmony?
While it’s easy to plan and dream of these types of improvements, a lot of bubbles are burst when the question of financing the job comes into focus. I asked my colleagues about this, and they all agreed that most homeowners already have the money built up in the equity of their homes. One way to tap into that equity is to refinance your mortgage.
I hit the pause button immediately and asked if refinancing is really even a thing these days, as the refi boom has come and gone. I quickly learned that this market still has plenty of momentum, as rates are very reasonable and homeowners are looking at various ways to utilize this financial tactic beyond simply lowering their interest rates. For example, one of your members could refinance their home to:
- Lower their mortgage interest rate. I know, I just said there are other reasons to refinance, but don’t forget this core benefit. A member could consider lowering their interest rate if the drop is 2 percent or more from their current rate. Even a 1 percent drop may be worthwhile if the member can justify the costs associated with the refinance. It’s smart to remind your members that it could take 36 months or more to truly realize the benefits of refinancing.
- Pay for home improvements. An option offered up by my colleagues, a “cash out” scenario can fund these additions and renovations. Depending on the impact on the member’s interest rate and upfront costs of refinancing, you will also want to educate them on the benefits of a home equity loan – there aren’t as many upfront costs and the home loan is not restructured.
- Pay off or consolidate credit card debt. Credit card interest rates are considerably higher than mortgage rates, so if a member has enough home equity, they can refinance for more than the remaining balance and use the excess to pay off credit card debt.
- Reduce the life of the loan. Savvy members who can afford to refinance from a 30-year loan to a 20-, 15- or 10-year option can potentially save thousands in extra interest, depending on the rate for which they qualify.
- Switch to a fixed-rate mortgage. If a member has a fluctuating adjustable-rate mortgage (ARM), they can refinance to a fixed-rate mortgage and save a chunk of change. Again, that all depends on the interest rates of the ARM and fixed-rate mortgage.
- Eliminate private mortgage insurance. If a member put less than 20 percent down on their current mortgage, they are likely paying for private mortgage insurance (PMI). If their home has appreciated in value, they might be able to eliminate or reduce PMI by refinancing. Of course, this option may not be necessary if the property has significantly appreciated in value – members should call their loan servicer to learn more.
I always stress that communication with your members is important; that is particularly true when you’re discussing refinances. Be sure to be transparent and educate them on closing costs associated with refinancing their home loan. Also remind them that they still need to meet your credit union’s lending requirements, such as minimum credit scores and acceptable debt-to-income ratios.
In today’s market, refinances are still a viable option for members to save money, simplify their budgets and take their next step toward their financial goals. For me, it’s all about expanding my home as my family grows.
Fortunately, based on a recommendation from one of my colleagues, I’ve identified a contractor willing to take on the job! I’m hoping the contractor has expansive knowledge of metallurgy, as they will be dealing with some unfamiliar alloys within my ship’s core structure. In the meantime, I need to find somewhere to convert my Amicitian credits to American dollars. Anyone know of a good credit union that could assist? 😊