Consumers Being More Careful with Their Extra Money

There was a time not too long ago when consumers would refinance their homes so they could get money from the equity they have built up and get that money back in cash. They would then use that cash to buy some toys, such as boats, RVs or long vacations. But in the last couple years, there has been a trend to do just the opposite. Many homeowners are actually putting up more of their money when they refinance and putting that money toward closing costs and their mortgage rather than using it for something less responsible.

Many of these homeowners who have decided to do this see the historically low mortgage rates as a chance to save money over the term of their loan. Homeowners who have an extra chunk of money sitting around are putting that chunk toward refinancing their mortgage. This brings their total balance of the mortgage down considerably and saves them money over the life of the mortgage. Combined with the mortgage rates which are well below 5 percent right now, it’s an added bonus for them.

People simply aren’t investing their extra money in other products, either. CD rates are not doing so well right now and the federal government probably won’t be raising those rates for awhile. Fewer people are leaving their money or putting it in the stock market anymore either because of its volatility and uncertainty. As a result, they are turning to something they know is secure and will save them money – their home.

Mortgage rates fell to about 4.56 percent for 30-year fixed loans for the week ending on July 22. Those rates are the lowest they have been since they began being tracked nearly 40 years ago. Rates for 15-year fixed mortgages also fell to record lows at 4.03 percent.

If you have been considering cashing in on your refinance rather than cashing out, here are a few reasons to help you make your decision:

• You can change your 30-year fixed mortgage to a 15-year fixed mortgage and your payments won’t be too much more than they are now.

• You may be able to stop paying PMI if you are putting at least 20 percent of a down payment on your home. This will save you money each month as well.

• Bringing cash to the table when you refinance may bring your mortgage loan below the conforming loan limit so you may be able to avoid paying higher jumbo rates.

Weigh all of your options before making your decision and find out how bringing extra cash to the refinancing table can help save you money. Make smart decisions with your money now and you may be able to splurge a little bit when it comes time to retire.