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Is Now a Good Time to Refinance? (From an Investment Perspective)

By Holly Franklin

Homeowners are often thinking of what they can do to upgrade their home.  Making small adjustments here and there, adding fun seasonal decor to boost curb appeal, and conducting long-term home maintenance to keep things running smoothly are all things one might do to increase the value of their home. 

If you’re a homeowner, have you ever thought about what your home can do for you? Owning a home opens certain doors, especially in the financial world, that can present you with certain monetary opportunities you wouldn’t have if you weren’t a homeowner.

One of the most well-known ways of owning a home can help you financially is the ability to refinance. Whether you’ve lived in your home for decades or have purchased it within the last few years, it may be possible to refinance your mortgage, save dollars on your monthly payment, and re-deploy those dollars elsewhere for growth. Even if you find yourself in a comfortable financial situation, refinancing may be a smart decision that can allow you to save more of your hard-earned money for years to come. 

If you’re asking yourself why refinancing is something you should be looking into at this time, the answer is simple: COVID-19. The sudden outbreak of the virus caused several ripple effects on industries across the globe, including the housing market. Most notably, interest rates have plunged to record lows, causing many prospective buyers to run enter the housing market. In fact, as of early August 2020, rates have hit record low points eight times throughout the year. This means by refinancing right now, you’ll be putting less money towards interest payments over the entire lifetime of your loan. Depending on your current payment and interest rate, you could save hundreds of dollars per month – giving you the opportunity to put more money toward your mortgage balance than you would have had before, allowing you to pay off your home faster than before 

The money you save by refinancing may also be a great way to jumpstart your retirement planning as well. When you decide it’s time for you to retire, you want to ensure you have a solid retirement nest egg in place to cover any of your needs. In this example, the hundreds of dollars you would be saving each month from your home refinance can add some extra padding to your retirement funds.  

When deciding how you want to refinance your home, there are a variety of factors to consider. One of the most important considerations is the length of time you plan to be in your home. For example, if you’ve decided to temporarily relocate to a less urban location while COVID runs its course, a no-closing-cost refinance such as this one offered by Quicken Loans might work for you. This option is ideal for a home you plan to only live in for a few years - allowing you to pay no refinancing fees upfront, and sell the home before paying too much in interest. 

Of course, no one can predict the future. Interest rates can change quickly, which is why it is important to consider taking advantage of low rates now before they go up.  A few months from now, the financial landscape could look completely different and your window of opportunity could be lost. It’s important to remember, while you might be financially comfortable now, things can always change. The monthly savings you’d gain by refinancing your mortgage payment now could be the difference between being comfortable in retirement and having to remain in the workforce longer before you are financially ready to retire. 

Before making a decision, however, you might want to consult with your financial advisor to help you answer any questions you may have. They can help guide you in the right direction and assess your overall financial situation to help you make the most effective decision for your portfolio and ultimately, your life. After all, big financial decisions can be some of the hardest ones to make without extensive knowledge or research. Having someone you can trust to guide you through it can certainly make the process less stressful. Additionally, PARAGON can run several alternate scenarios for you in your financial plan – allowing you to see the impact of the actions that you take today on your long-term planning.


IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Paragon Wealth Strategies, LLC [“Paragon”]), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Paragon.  Please remember that if you are a Paragon client, it remains your responsibility to advise Paragon, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Paragon is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Paragon’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request or at www.wealthguards.com. Please Note: Paragon does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Paragon’s web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please Also Note: IF you are a Paragon client, Please advise us if you have not been receiving account statements (at least quarterly) from the account custodian.