31.7 C
Tuesday, October 26, 2021

Why is it good to refinance your loan amidst the pandemic?

Must Read

Review: realme Band 2

The realme Band 2 is a budget-friendly smartwatch that features multiple health and fitness features for a healthier lifestyle....

Level Up Your Home Office Setup with Logitech C922 Pro HD Webcam and Logitech H370

The pandemic has dramatically changed our lives and relationships over the past year. While the physical world is on...

Keep track of your health with the HUAWEI Ecosystem

With all the challenges we are facing, staying active not only keeps our body physically healthy but also helps...

Enjoy an Immersive Listening Experience with HUAWEI FreeBuds 4’s High-Resolution Audio Quality

Huawei’s new open-fit Active Noise Cancellation 2.0 earphones, HUAWEI FreeBuds 4, have been praised by many Filipino users for...

Review: HUAWEI Watch 3

The HUAWEI Watch 3 is one of the latest wearable launched by HUAWEI, alongside the HUAWEI FreeBuds 4 and...

The current pandemic had pushed a lot of people to work from home, therefore a lot of homebuyers – old and new – are now entering the market. In the United States, mortgage applications to purchase a home increased by 2% for the second week of December 2020, despite the fact that December, in history, is not typically a strong month for home sales. Apart from this, there is also a surge in the Refinance demand of 105%, as reported by the CNBC, as mortgage rates set 15th record low of 2020.

We may wonder, what is a refinance and why is it on demand nowadays?

A refinance, refinancing or “refi” simply means the replacement of an existing debt obligation with another debt obligation under different terms. Usually, it relates to a loan or mortgage, in which the terms of an existing credit agreement is revised and replaced. These changes in the terms are favorable to a business or an individual’s interest rate, payment schedule, and/or other terms outlined in their contract.

Usually, borrowers refinance when there is a substantial change in the interest-rate giving them potential savings on debt payments from a new agreement.

With the current pandemic and global downturn, interest rates fall and therefore, now is the best time to refinance your mortgage loans, car loans or student loans. Still wondering how refi works and its benefits? This online free refinance calculator will be able to show how much you will save by refinancing your mortgage.

Let’s say that your home price is $300,000 and you pay 20% down payment which is $60,000. You will have an original loan amount of $240,000 from your chosen lender. Your original APR is at 7% for a 30-year term and you still have 20 years or 240 months left to pay your mortgage. Let’s set aside refinancing closing cost in this computation for clearer explanation, but be ready for this additional cost if you are going to refinance your loan or mortgage.

Suddenly, interest rates fall to 5% because of the pandemic. When you refinance your mortgage during this period, your monthly payment will be reduced from $1,596.73 to $1,073.65 which means you will save $523.08 monthly for the remaining 20 years of your loan term.

Refinancing is a consumer’s response to shifting economic conditions. They do this to lower the fixed interest rate to reduce payments over the life of the loan, to change the duration of the loan, or to switch from a fixed-rate mortgage to an adjustable-rate mortgage or vice versa.

If a borrower’s credit profile has improved, they also tend to refinance their loan to pay off their existing debts by consolidating them into one low-priced loan.

Why do you have to consider refinancing amidst this pandemic? First, you can get a lower monthly mortgage payment and interest rate, which means you will save a lot. From the example above, the borrower will save $523 per month for refinancing. Imagine what that amount can do to your monthly expenses. Another pros of refinancing is that you can convert an adjustable interest rate to a fixed interest rate and you can acquire an influx of cash for a pressing financial need.

Latest News

Shoppertainment Live opens seven ‘Livestyle’ Studios to empower more brands become activations future-ready in the next normal

With the live commerce market rapidly growing and thriving amidst the new normal, the country’s first and leading livestream...

Spice Up Your Holiday Season with This Legendary Gift Set

The holidays are just right around the corner and the pressure is on to hunt for the perfect gift for the #LegendaryMen! But what...

Amazon Global Selling held inaugural 2021 Amazon Expo-Seller Boot Camp

Amazon Global Selling held its inaugural 2021 Amazon Expo - Seller Boot Camp to further introduce MSMEs to cross-border e-commerce and how Amazon global...

Sold out in just 6 minutes! realme Pad achieves excellent launch sales on Shopee

2021 is proving to be an exceptional year for realme Philippines as it has continuously solidified its position in the tech industry across different...

SHARP launches AQUOS THE SCENES 8K series to enrich family quality time

SHARP today announced the Philippine launch of its new flagship Audio Visual products, AQUOS THE SCENES 8K, providing new dimensions of immersive experience in...

Airbnb encourages Pinoys to #TravelAsJuan, as travel searches surge for beachside and nature destinations near Metro Manila

Airbnb today launched its new #TravelAsJuan campaign that aims to energize the Philippines’s tourism recovery throughout the remainer of 2021 and beyond. As part...

Climate Change Commission and Nestlé PH partner to discover sustainability-focused solutions for the planet, from the youth

Around the world, the impacts of climate change are already being felt across all sectors. It is evident in the occurrence of more frequent...

More Articles Like This