By Charity Ohlund, VP Sales & Marketing at Fountain Mortgage
If you’ve heard the rumor that mortgage interest rates are slowly coming down, you’ve heard right. Rates are down about a percentage point from their high point in 2023.
You may be saying to yourself, “They’ll have to come down a lot more than that to get my attention. I have a rate in the 3s!”
If you are one of the lucky people who gets to brag about locking in a mortgage interest rate in the 3-percent or even 2-percent range, congrats! The “Covid” rates of 2020 and 2021 were indeed historic – so low that we’ll likely never see them again.
So why did a Johnson County family recently turn to us to refinance their mortgage from a rate of 3.875% to 6.875%?
In 3 words? To save money.
If that has you scratching your head, let me explain.
The “Johnson” family accessed the equity in their home to pay off debt. This added to their mortgage balance but eliminated all other monthly payments, thus increasing their monthly cash flow.
Here’s how it worked:
Former mortgage balance $247,000
Former mortgage interest rate 3.875%
Former monthly mortgage payment $1,944
Auto 1 monthly payment $386
Auto 2 monthly payment $277
Credit card 1 monthly payment $282
Credit card 2 monthly payment $186
Student loan monthly payment $179
TOTAL MONTHLY PAYMENTS $3,254
New mortgage balance $313,000
New mortgage rate 6.875%
New monthly mortgage payment $2,470
Other monthly debt payments $0
NEW TOTAL MONTHLY PAYMENTS $2,470
Through a cash-out refinance, they were able to pay off their debts and save $784 per month in payments. This is $9,408 per year.
Most people think that a refinance only makes sense when the rate or the term are able to be lowered. But this example demonstrates how leveraging equity to pay off debt can reduce your monthly payments, even at a higher mortgage interest rate. (Plus, most of us just sleep better at night knowing our debt is organized and under control).
If you’d like to explore if this option would work for you, please reach out to me for a no-cost consultation. I’ll connect you with one of our experienced team members here at Fountain Mortgage. cohlund@fountainmortgage.com or 913-721-8872
This weekly Sponsored Column is written by Fountain Mortgage. Located in Prairie Village, Fountain Mortgage is dedicated to educating, and thus empowering, clients to make the best financial decision possible for their situation.
Fountain Mortgage NMLS: 1138268
