- How's it going today, guys,
welcome back to the channel. So in this video today, we're gonna be covering
everything you've ever wanted to know most likely
about mortgage refinancing. So it's been kind of a buzz word over the last couple of years, because we've been in an
interest rate environment that has pretty much
been a good opportunity for a lot of people to consider
refinancing their mortgage for one reason or another. In fact, last year in
2020, I also took advantage of a mortgage refinance as
a means to add more equity to my property with a new
loan based on some upgrades that I had made to eliminate
some PMI on my property. And also because interest
rates were quite a bit lower from when I had originally
gotten that mortgage. So I have a lot of information
to share with you guys as well as some firsthand experience about my own personal mortgage refinance. So of course, like always guys there's a lot to unpack
here in this video. So that being said,
guys if you are watching this on your computer, and you've got your phone
sitting there next to you, I would encourage you
to put that on silent just so you don't get distracted here. And you may also want
to grab a pad of paper, and a pen or pencil to
take some notes here. There is gonna be a lot of information. And other than that guys, you might want to grab yourself a drink. I got myself a fresh
cup of coffee right here so I am all ready to go. So that being said, guys, let's jump right into the presentation. All right guys, so as mentioned, this is mortgage refinancing
for beginners in 2021, a step by step refinancing guide. Now real quick guys, I just
want to make this disclaimer as I do in all of my videos, be careful of the spam and
scam comments down below. There's a lot of people that
are just canvasing my videos lately with different comments
about Bitcoin, crypto, et cetera, all kinds of different things. Just keep in the back of your mind, guys, I'm never gonna ask you to send me money or contact me on WhatsApp
or anything like that. So if anybody is communicating with you in the comments down
below and it says my name, make sure there is that
white check next to my name with a subscriber count of over 700,000. Otherwise that is definitely a scammer. And if you guys do see scams
going on down in the comments, please do your part and
just label it scam or spam, just so other people know that, that way they're not gonna
fall for that hopefully. So anyways guys, that is my
real quick mention there. Also there are a few quick
disclaimers here for this video. First of all, myself, Ryan Scribner here, I am not a financial advisor or any kind of investment advisor. Also guys, any of these recommendations, I'm sharing here in this video are 100% for entertainment purposes. Only not to mention guys, there is also some affiliate links present on this video here with a
company called Credible, who has also sponsored this video. So if you do decide to use
any of those links down below I may earn a commission in the process if you choose to do so. However, that of course
does not have any impact on my thoughts, feelings or opinions about any given companies that
I discuss here on my channel. Alrighty, so starting
off at square one here, let's talk about what exactly
does it mean to refinance? So most people out there take
out a mortgage to buy a house. And that is simply because the majority of people just do not have 100s of 1000s of dollars sitting around to put towards a real estate purchase. So we take out a mortgage from a bank. Now this borrowed money
then goes to the seller of the house. So the seller gets paid immediately. And then the bank is gonna
basically carry that note or that mortgage for you, where you're gonna make
payments to the bank. Now refinancing essentially means that you are restructuring the
loan on that given property if we're talking about a house. So this could mean things
like changing the term of the loan or how long it is. This could mean changing the interest rate or a number of different factors. And it could also mean
changing the loan to value or the equity that you're
putting down on that property. Now, the borrowed money
that you have can be used to pay off your existing loan
in a refinance environment assuming that the property
that you own has appreciated in value while you owned it. And when you go through
the process of a refinance, you're essentially replacing
your current mortgage with a new one. So a new bank is gonna
write you a new mortgage on that property with different terms, and then they're gonna
pay off the old bank, and they're gonna become the new bank that you're working
with for your mortgage. And it's actually a very similar process to what you went through
with your initial mortgage where you typically have to
show up to an in-person closing and there may be some fees and
costs associated with that. So it is very similar to a traditional closing
process on a home. So it sounds pretty complicated and it typically costs you some money. So why would anybody
refinance in the first place? Well, first of all,
when you're refinancing, you're basically beginning
with your end goal in mind, and this is gonna be a big decision, and it really doesn't have
to have some serious thought, because you can't exactly
just refinance your property every single year because of
the fact that you're gonna pay typically some type of closing costs. So it wouldn't be cost-effective
to just go out there and refinance every single year. So it's typically a decision
that you have to make for the next three to five years or more, when you're gonna refinance. So you should highly consider
it, do your research on it, and fully understand this
is not the type of move that you can make every single year, you have to put a lot of thought into it. So for most people, the largest asset that they
have is in their personal home. And this is because the
mortgage basically works as this sort of forced investment plan, because at the end of the day, as you're making those mortgage payments a certain percentage of
that bill or that mortgage, is going towards equity and
that means you're owning more and more of your home every single month. And a refinance is simply
a way, one of the ways that you can tap into that
equity within your property or a combination of that and
potentially that property going up in value in a hot market. Now we're not gonna talk specifics here about real estate markets guys, but the majority of the US real
estate market has done well over the last one to two years. And when you combine that
with a low interest rate environment you sort of get this scenario where refinancing becomes
something that most people will consider if they are
looking for additional means of cash or ways to maybe add
more equity to their property or do different things like that. So there's many reasons
why someone would choose to refinance their mortgage, but most of them are gonna
come down to saving money on payments or tapping into
the equity of their home. So for my case guys, with my
refinance, when I did that the goal was to eliminate PMI,
which is mortgage insurance. It's essentially a waste of money. And because I had done a lot
of upgrades to my property, and paid that mortgage
down for over a year, I was able to have a
higher appraised value, put that extra money towards equity, put a little bit more of my
own money down on the property, get to 20% loan to value. And I personally cut my
mortgage payment down, by a couple hundred dollars per month. So that was my reason for refinancing but somebody else might do it for a totally different reason. Maybe they're looking to
do a cash out refinance, and then use that money
towards maybe the down payment on another property. There's all kinds of different reasons why people want the money, but typically refinances
either lower your mortgage or put more cash in your pocket, which you're gonna use for a multitude of potential different reasons. So let's talk more specifically here about the potential for reducing
monthly mortgage payments. Well, this is one of the
most common reasons why people choose to refinance
in the first place. And if interest rates fall on mortgages, which they have over the
past couple of years, you may be able to lock
in a lower interest rate. So just based on interest
rates alone guys, a lot of people have refinanced
just to knock a couple of points off of their mortgage or even just like half a
percentage or something like that. In my case with my refinance, I was able to save 0.5% on my mortgage. And that was part of the reason
why I decided to do that. Now one important
consideration to make here is that if you do choose to
extend the term of your mortgage you can have a lower monthly payment. However, understand that
you're basically pressing the reset button on that mortgage, and starting off potentially at a fresh 30 year term mortgage. So this can lower the monthly payment, but it's usually not ideal because you're resetting that clock. Meaning you're gonna be paying much more in interest in the long run. So that's another important
factor to consider is that when you do refinance a mortgage, if you go for the same term as before, you're clicking that reset button, however, some people may
refinance from a 30 year mortgage to a 15 year mortgage, which
would be shortening that clock. And even if you do refinance your mortgage and reset that clock,
what I typically recommend and what I do myself is
making additional payments. So even though my mortgage payment is only like 2,400 bucks on my
property in New York, every single month, I pay
$3,000, no matter what. And then on my Florida mortgage,
that's usually like $3,300 but I pay 4,000 every single month just to pay additional money
towards that principal, and shorten down the
term of that mortgage, just by accelerating my payments, which go straight to principal. And then of course the overall goal here of reducing your monthly mortgage payment, is to free up cash flow. Perhaps that's gonna be directed towards investments
savings, who knows what, but ultimately the goal with
reducing your mortgage payments is to increase your monthly cashflow to direct towards other areas. Now, the reason why refinancing
has become so popular in the last few years is
related to this global pandemic, and kind of this trend we've
had with the housing market that started about 10 or 11 years ago, with the Great Recession and
the housing market crash. So after that we saw interest rates lower than really we had seen
in a long time in history. Back in the 1980s, and in the 90s when a lot of our parents
were getting mortgages, there was not uncommon
to have an eight, nine, 10% interest rate on your mortgage. So now we're looking at
really, really low rates, not to mention if you've
got a mortgage in 2019 for example, you may have an
interest rate of 5% or more and you can see how drastically
mortgage rates have fallen from 2019 into 2021, largely
due to that pandemic. Essentially at that point in time, the Federal Reserve lowers the
federal funds interest rates. It lowers interest rates across the board, encourages more borrowing,
encourages more spending, and accelerates the overall economy. Now has that gone too far? And are we seeing
unsustainable housing market? Well, that's a topic for
another video entirely guys, but a lot of this has to
do with this interest rate right here that is tied
to the federal funds rate. So we're in a very low
interest rate environment. However, if the housing market
is celebrates too quickly one of the options the
Federal Reserve has, is to increase interest
rates to pump the brakes. So there may not be as
long of a window of time. As many of us were hoping for, to take advantage of a
refinance opportunity at these really, really
historically low rates. So just to cover this
here quick for you guys, let's go over an example of a refinance. Okay, we're gonna go backwards in time, and say that it's today in 2019, and you just bought
this house for $550,000. Now let's say you took
advantage of the FHA loan, which is how I personally got into my first real estate property. And you put 3.5% down or $19,250. That means that the mortgage on that property is gonna be for 530,750. And let's say it's at a 5%
interest rate, which means that your mortgage here is
gonna be $2,850 per month. But now strictly looking at
this from an interest rate standpoint not even considering PMI, and other factors like that, let's say this person
strictly took their mortgage from a 5% interest rate
down to a 3% interest rates. Well, after two years, you would have paid your
mortgage down to $515,000. And after that refinance with
that new interest rate at 3% this mortgage now becomes
a $2,171 per month payment. Now, obviously guys, there's other factors and other things you pay outside of this, such as taxes, mortgage insurance, Homeowners Association fees. But we're actually looking
at the interest rate, this is how much of this
can drastically impact a mortgage payment. So in this specific case here,
starting out with an FHA loan at a 5% interest rate and then
two years later refinancing down to a 3% interest rate
with that small amount of principal pay down. And then that lower interest rate, this reduced that mortgage
payment by $679 per month. So it can be a significant
amount of savings and new cashflow monthly that
you just did not have prior. Now, like I said, my favorite strategy is to then put that extra money
still towards the mortgage but just go have it
going towards principal, and paying down that
principle to drastically shorten the term of that loan. Now this section of the video here guys, is a paid advertisement from
a company called Credible who has sponsored this YouTube video. So one of the most important aspects about refinancing is your interest rate, and a difference of a fraction
of a percent could mean 10s of 1000s of dollars of interest. As we saw in that previous
example there guys, just a difference of 2% was
100s of dollars per month, on that given mortgage. So Credible is essentially
a tool that compares rates across dozens of different lenders. And it only shows you the
rates for pre qualified loans that are available to you. Not to mention guys, this
is all with no impact on your credit score
for checking your rates. So if you are just remotely
curious about this guys, you may decide to use Credible and go through that without
even having a credit check, just to see what rates
may be available to you. Also with Credible, all of
the loan terms are very clear, and there are no mysteries or
things that, smoke and mirrors or things that you just are
having a hard time figuring out, each loan also shows you
the total dollar amount that you will pay in interest. So there are no surprises, and you know exactly
what you might be paying if you do go through with that lender. Credible is a completely
unbiased resource helpful in comparing loans. It doesn't allow companies to pay to be ranked higher whatsoever. And this is why they are
trusted over 1.4 million users. So if you guys decide that
you want to check this out, I do have an affiliate link
down below for Credible. If you want to give back to me I may earn a small commission, if you do decide to use that link. Also, guys, we'll have a quick reminder at the end of the video about Credible. So don't worry about doing that now, we will talk about that
at the end as well. So now I want to talk about
potentially restructuring the financing surrounding your
mortgage through a refinance, because as we said earlier,
refinancing is paying off an old alone and getting a
brand new loan on a property. And there are different types of mortgages that you just may want to be aware of, as options available to you. So most of us are familiar
with that 30 year conventional mortgage or that FHA loan, but there's also a 15 year mortgage. There's an adjustable rate
mortgage, balloon mortgages, different things like that. Now some of those are financial
products that got people in some trouble last year. So I don't personally touch
anything adjustable rate or balloon mortgages, anything like that. I have 30 year conventional mortgages on both of my properties, but
I just wanted to share these with you guys, just so you are
aware of what is out there. So in the act of
refinancing, this could also allow you to switch to a
different type of mortgage, if you decided to do that. One of the best options if
you are a monthly income, for example, has increased a lot, you could switch from a 30 year mortgage to a 15 year mortgage to pay
your home off a lot sooner. This will of course increase
your monthly mortgage payment but it may allow you to pay
off your home before retirement which would be a phenomenal
goal that most of us would have. Also, if you are somebody
who is currently involved in an rate mortgage,
you could also refinance to a 30 year fixed rate, just to give yourself more peace of mind. So now let's talk more
specifically about PMI, or private mortgage insurance. This is something that
I encountered myself, and it was one of the primary reasons, why I refinanced my property
in New York in 2020. So if you buy a home
with less than 20% down, you will most likely be required
to pay something called PMI and this protects the lender, if you were to suddenly
stop making your payments. It is typically added to your
monthly mortgage payment. But the good news is once you
reach 20% equity in your home you can refinance to remove PMI. Or there are a lot of
mortgage lenders out there that simply remove the PMI as soon as you hit 20% loan to value. So if you're somebody right now, that's in a situation
where you're paying PMI, and maybe you're considering a refinance, you should contact your
lender and ask them, hey, how do I get rid of PMI? Can I simply pay down the loan or do I have to refinance in
order to eliminate this PMI? And in some cases, guys, like for myself, the PMI on my property was
like $315 every single month just right down the tubes. It is just insurance that you have to pay. You get nothing really for it and you don't get anything out of it. It's just almost like car insurance. You just have to pay it. You don't really get much
out of it unless you need it, but it's there to protect the bank. It does not protect you. So how much is PMI? Well, it's typically a
range of 0.58 to 1.86% of the original loan amount per year. And so, as you can see, that can be a significant chunk of change. On a $550,000 house, that
could be an extra 200 to $600 per month of insurance money,
which just goes nowhere. So let's talk more about
where your money goes when you actually make
a mortgage payments. Because every payment that
you make on your mortgage is gonna be split in a
couple of different pools, but two of the main ones are,
or for equity and interest but there's also this other
category called escrow, which goes towards insurance, taxes and different items like that. But we're gonna primarily
in this case here talk about equity versus interest. Equity increases the ownership percentage that you have in the property, and interest is the cost
of borrowing from the bank. So over time, you're gonna
build more and more equity in your property which
means you're borrowing less and less money. So with a mortgage, I'm sure
you've heard of this before, but at the beginning the
early years with a mortgage, that's when you're borrowing
the most amount of money and you're paying the most in interest, but over time as you pay
down the property more, and you get more and more equity, you're borrowing less and less money, naturally you're paying less in interest. So more of your money from
that mortgage payment, goes towards equity. So that's one of the annoying
things about a mortgage, is that in the first couple of years, the majority of what you
are paying is unfortunately just interest due to the
nature of the fact that, this is the point in the loan, where you're borrowing the
maximum amount of money. So over time though, by
making these mortgage payments or just by simply holding onto a property in an appreciating market, you build more equity in this property. And then refinancing is one of the methods that could allow you to
access some of this money. And that is typically
through something called a cash-out refi. So now let's go ahead and cover another home
equity example here. So let's say after 10 years
of paying down your mortgage, you've paid down $99,000 in principle. So if the house
appreciated at 2% per year, which is a very conservative estimate, typically it's somewhere around five, but in the last couple of years, we have seen a lot of double digit growth in a lot of hot real estate markets, but we're gonna go with
2% for easy numbers. If the house appreciated at 2% per year, it is now worth $670,000. So in addition to your at
$19,000 initial down payment, you would now have 230,
$8,000 in home equity. So let's consider a cash-out refi, which essentially means
taking out a new loan on the property with a larger balance than the previous loan, based on the fact that the
property is now worth more because you've owned it for many years in an appreciating market. So one of the most popular
ways to access home equity is through a cash-out refi. However, it can be dangerous if the housing market crashes afterwards, because basically what you're doing is breaking your piggy bank. So your house is like a big
piggy bank that you've stuffed a ton of equity into. And if you cash-out refi,
you're getting your sledgehammer you're breaking the piggy bank and you're starting off with a fresh loan, typically just at that
20% loan to value mark, that way you have only the
required amount of equity down maximizing the amount of
cash that you can take out. However, you're just
going to be significantly lowering your loan to value on that and increasing the dollar
amount of your mortgage. So it's kind of like selling
your house back to yourself at a higher price, but if the
market were to have a downturn and then you sold your house
to yourself at a higher price but now your house is way over priced, compared to what it's actually
worth in the local market. That's where people can potentially run into some trouble there. However, that is gonna
have to come from you and your own research
of the housing market. Personally, I'm not concerned
about the housing market but I will be leading the
majority of the equity that I have just in my properties. I mean, I have 20% equity
on both of my properties and they've both gone up
significantly in value. So I could do home equity line
of credit or cash-out refi. But personally, I just
will be keeping my equity in my property for now, but I will of course update you guys, if I changed my mind on that. Now, in terms of what
you do with these funds, I actually did a full 40 minute
video the other day called, "Smart Borrowing 101", where I talk about ways to use
borrowed money in smart ways. So I'm not gonna get into
a ton of detail here, guys, but I will put that card up in the corner. That way you can check it
out at the end of this video. But essentially, you have
to be careful what you use this money for because you're
taking it out of your house which was an appreciating asset. And then if you take that money and you buy depreciating liabilities well now you've took
money out of an asset. And it went from growing in value to going into something
that declines in value. So a lot of people will
use a cash-out refi to buy another piece of real
estate, start a business, do something like that. So generally speaking, it is not a good idea to just
pull the cash out of your home and go on a spending spree and
blow it all on a liabilities and things like that. So let's cover an example
here of reinvesting that money instead back into your home,
which is my favorite way of using a cash-out refi. So after 10 years of
paying down your mortgage, you've paid down a 200
or $38,000 in equity. If you pull out that $100,000
with a cash out refinance, you will have $138,000 of
equity still in the property. And $100,000 of actual cash, a check being cut to you at the closing. If you put that $100,000 though
into renovating your home, you could potentially increase the value, but increase it more than
the initial investment, because what you're gonna find
out about owning real estate guys, is people want
something that is turnkey. So if you take a property
that's in need of updating and you can update it and you
don't go crazy with your costs and you bring it up to
parody with the rest of the local market, typically
there's money to be made in that type of a transaction. So that is one option that
people have is buying something, and then they're able to upgrade it after they pay their
loan down for many years. And then even after that, you could then do another
refinance if you wanted to, that's a whole other
avenue you could go there, is basically pulling your cash out, doing a bunch of upgrades, and then a couple of years later, if that market is still appreciating, you could do another cash-out
refi, get your cash back out and then do something else with that. This is one of those
tools of the millionaires that they use for acquiring
a lot of real estate in a very short period of time. But of course it is always gonna come with its unique risks
that you will have to do your own research on. So let's say for example now that because your home is now turnkey the renovations have increased the value of your home to $800,000. This means that you no
longer have the $100,000 cash from the cash-out refi because
you spent it on remodeling. However, now your home equity
just went up by $130,000, and is now worth 268K. So you took out a 100 grand, but then you got $130,000 back in equity. That is how you can use a cash-out refi, put it back into upgrades
and then make money by upgrading your house and in turn, giving yourself a nicer place to live. So it can be an overall win-win scenario, but again just keep in mind by doing this, you are getting a bigger
loan on your property, and you are taking equity out, and you just want to make
sure you're not over upgrading or going above and beyond, where everybody else is
at in your neighborhood. So now I want to talk
about something else here similar to a refinance, which is a HELOC, or a home equity line of credit. This is a common alternative
to the cash-out refi. And as I said, it stands for
a home equity line of credit. This is a revolving line of
credit that you can tap into basically whenever you need to. And it is similar to a credit card that is secured by your house. So you're basically offering
the bank some equity in your home, in return
for a line of credit. And then if you didn't pay
that line of credit back well they own that piece of your home. So that's basically how a home
equity line of credit works. And because it's collateralized
or backed by your home, interest rates are
generally pretty attractive. Now, in order to tap into
this, you're typically going to need a 620 plus credit score, and at least 15% equity in your home. However, they are getting
a lot tighter with HELOCs. So, probably 25 to 30% equity, these days is more in the neighborhood of what you should be looking for. The lender will set a limit on the maximum that you're able to borrow. And this is gonna be based on
the total value of your home. And they typically are gonna
do a brand new appraisal before issuing a home
equity line of credit. However, do keep in mind to
your, that interest rates on HELOCs typically change over time. And they are generally not fixed. We are in a very, very low
interest rate environment. And if that does change,
a lot of these bargains are not such good bargains anymore when they begin costing us more money. So it's really easy to find
ways to use cheap money right now, but as that money
becomes more and more expensive as interest rates climb,
there's gonna be less and less of an opportunity to make
money with some of this other money or basically deploy that capital. So how does somebody actually go through a refinance process? Well, the basic process
is to take out a new loan and to repay the old one. And as somebody who did this myself, get ready for probably a
dozen hours of paperwork, and back and forth stuff and phone calls, and things like that. There is a good amount of work. However, services like Credible
may help you to streamline that process and make it a bit easier. So you can compare your rates
using tools like Credible, to find the best deals
possible that could save you from going through multiple
application processes. And you can also use a
refinance calculator, to make sure that the math checks out, and to make sure you're
actually saving money, because in some cases the closing costs, will offset the savings and
it may just not be worth it to do that financially. There are plenty of helpful
refinance calculators that will help you to determine this. So after that, once you take
a look at the calculator, and you ensure that it makes sense, and you can use a comparison
tool like Credible to find lenders, at this
point you're going choose the lender that provides
you with the terms that you are looking for. At that point, you're gonna
want to read through the loan estimate document to
find the closing costs, and lock in your interest rate before the loan offer expires. Now, usually you have
anywhere from 15 to 60 days, and they'll typically
do a rate lock for you, but those have a set expiration date. So you got to get your
ducks in a row quickly and keep things moving
throughout the mortgage process. Now, when you officially
close on the new loan that is when you will pay
off your existing loan. And then at this point, you will successfully
refinance your mortgage. So it's similar to a real closing, at least for the one that I did, I had to show up in person
and sign a ton of papers. And it was at least a
30 to 45 day process, and a good amount of paperwork. So it's not as simple as a HELOC, but there are advantages to it, that you don't have with that
home equity line of credit. Now, as somebody who has
refinanced in the past here are some of my refinancing tips. First of all, most of the time refinancing will lower your monthly mortgage payments which means you will have
more cash in your pocket every single month. However, that's not always the case. If you don't have PMI and
you're increasing the amount of your mortgage, because the
property has gone up in value it might actually increase your mortgage. So if that was the case,
you'd have to make sure that getting a pile of
cash made more sense, rather than the outcome of
increasing that mortgage payment as a result. It's important that you
have a plan for what to do with this money guys, do not
just do it because you can. That's a bad idea. You're probably gonna
spend that money somewhere that you shouldn't spend it. If you leave the money,
locked up in your house, it's gonna keep going up in value assuming that your house does. But if you break that piggy bank, and you pull the money out and
you put it into a sports car, well, now that amount of
money in that sports car is gonna depreciate rather
than appreciate in value. So very much important to keep that in the back of your mind. Now in terms of where
to use that money guys, a lot of people will
put it towards upgrades of their property or maybe the purchasing
of another property. But as I said, I have a lot more examples of that over in my video,
talking about smart borrowing which is a great supplement
here to this one. Now that being said, there is no perfect
financial tool out there. And there are some cons of refinancing that I want to discuss. Now, first of all, as
we talked about earlier when you do refinance your mortgage, it's basically like
hitting a big reset button, and that resets you back to year one. And this chart right here
demonstrates how much interest versus principle is
being paid on that loan. So all the way back here in year one, only about maybe one sixth
or one seventh of your money on that mortgage, that's
going towards interest and principal is actually going
towards principal or equity. The rest is going towards interest. So if you do decide to refinance, my recommendation is make
accelerated payments above and beyond your mortgage to
make up for that difference and pay down as much
principal as possible, to minimize your interest
and shorten your mortgage. And of course, guys you can
see the difference there from year one to year 10
in terms of that red bar showing how much of that
money is going towards equity in your property or principal
versus interest being paid to the bank. And so if you were in
year 10 of your mortgage, you would be paying roughly
a third of your mortgage going towards interest and equity. That would actually be
going towards equity. But if you refinance, you're
gonna reset that button and start back at year
one where the majority of that money is going towards interest. So that is the downside, is you're pressing the big reset button, and a lot less of your
monthly mortgage payment, is gonna go into equity. A lot more is gonna go into interest. Also, guys, refinancing a
mortgage is not free to do. There's no freeway to refinance. When you get your initial mortgage, there are always gonna be
fees and costs that you owe, but they're typically paid in
part of that cash out process, when they pull the old equity
out of the previous mortgage. You also pay the same financing
fees when you refinance which is typically anywhere from two to 5% of the total mortgage. It is also important to take
these costs into account when refinancing because they
are typically just rolled into the new loan that you take out. And you don't want to just
unnecessarily be rolling more and more costs and fees forward. And that's how sometimes
it could potentially increase your payment
if you're not careful. So always do a mortgage
refinance calculator and make sure there's some
actual benefit to refinancing. It should either give you a bunch of cash or increase your equity and
lower your PMI or eliminate it. It shouldn't just increase
your mortgage payment and apply and give you a real benefit, otherwise, why would you do it? So those are all the things
that should be ironed out earlier on in the process. Also refinancing can also extend the time, it will take to fully own your home, by pressing that big reset button. However, you can mitigate that by making accelerated payments, which is something that I
personally do and recommend. So beyond that, outside of refinancing what are some of the alternatives? Well, we already talked about
the home equity line of credit which is gonna be a great alternative with less paperwork, and it
can be less expensive as well. Another option there is going
to be to look into potentially moving into a cheaper home, or you may decide to rent out
a portion of your own home, if you're finding that
your payments are too high and you're refinancing, because you can't afford
to live in your home. Now, if you're looking for
other ways to borrow money outside of your home, that's gonna be that smart borrowing video I did guys up in the corner there. A great supplement to this, we're gonna cover
portfolio line of credit, as well as crypto line of
credit, 401k borrowing, and other interesting sources of funds. But at the end of the day, guys, refinancing certainly can be a
great way to access more cash or lower your monthly mortgage payments, or sometimes do both. But it doesn't always make
sense for everybody to do one. And that is why it's
important to understand the ins and outs of it
and also know pretty much, why people do them in when
they typically make sense. Again, let me just restate this. It's very important that
you have a goal in mind with that money or you really
risk just blowing that cash. And again, if you don't have
any reason to take the money out of the piggy bank, just leave it in the piggy bank
where it's growing in value. That's the way that I look at it. Also make sure you give the
decision a lot of thought, it's gonna cost you some money. It's gonna take some amount of time, but it can make sense and a
lot of people including myself, use it as a financial stepping
stone that can be used to help you access cheap money and potentially get
further ahead financially, if you're comfortable
with the risks associated. Also one quick reminder
here from the video sponsor, Credible who has paid me
for this video sponsorship, make sure check your rates
with Credible, beforehand, if you do want to use
their comparison tools, it's completely free and there's no impact to your credit score. So it's free information,
if you simply want to see what is available to you, and you might be surprised
what kinds of loans that you are pre-qualified for. Credible makes it very easy
to compare apples to apples because everything is in
one place for you there. And banks often make it
intentionally hard to do this. That way you can't compare
from one lender to another but Credible makes that easier. And if you're confused, the banks know that you're
just likely gonna say yes, so they try to make it confusing
and difficult to compare. But Credible says, no, you
should be able to compare, and I certainly agree with that. Credible can give you the confidence that you are making the right decision, by allowing you to check
and compare rates for free. So if you guys want to check that out, there is an affiliate link
down in the description below and I may earn a commission
if you do use that link. So anyways, guys that is
gonna wrap up this video. I hope you enjoyed it. If you have any questions
about refinancing that I didn't cover in this video, make sure you leave me
a comment down below. If you made it to the
very end of the video make sure you drop a like, subscribe and hit that bell for
future notifications. Like I said, if you want
to compare rates online, feel free to check out Credible via the affiliate link down below. And I also have that full
video on smart borrowing. If you're looking for
other ways to potentially borrow cheap money outside
of a refinance on a mortgage and potentially outside of a
home equity line of credit. But thank you guys so much
for tuning in and as always I hope to see you in the next video.
