29.3 C
Manila
Sunday, August 1, 2021

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

Must Read

School Time Made Easier at Home: 5 Benefits of Using a Tablet for Online Schooling

School season is right around the corner. But with online schooling still being the norm among educational institutions, there...

Top 5 reasons to choose ASUS OLED laptops

ASUS was one of the first manufacturers to use stunning OLED displays in its laptops for creative professionals such...

Review: ASUS ZenBook 13 OLED (UX325)

If you are looking for a laptop built for digital nomads then you’re in the right place. With work...

Review: Huawei FreeBuds 4i

The new HUAWEI FreeBuds 4i True Wireless Stereo (TWS) earbuds is finally here, it was launched alongside the HUAWEI...

HUAWEI FreeBuds 4i Unboxing and First Impressions

Listening to music can positively affect your mood especially with the current situation where people are experiencing the highest...

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

Enjoy exciting deals from MetroSunnies™ this 8.8 Mega Flash Sale on Shopee!

MetroSunnies™ Gianni (Rose Gold) Con-Strain™ PRO Photochromic lens automatically adapts to your environment. It will darken when exposed under...

Dole’s sun-powered Promo ends with the biggest Pachinko game in the world

Did you catch Dole & Seasons Plantation Pachinko grand raffle draw? Php 1 million for the taking in a draw that’s larger than life!...

Binibining Pilipinas, together with Silka, awards the first ever winner of Miss Alagang Silka

The Filipina has captivated the world. For many years, she has captured the hearts and imagination of the globe, not only because of her...

Take your Wild Rift experience with Globe and Riot’s new RiotGO promos

From the beginning, League of Legends: Wild Rift has been an enormous success in esports, especially among Filipino gamers. The game just keeps on...

Get Ready for the Hisense Birthday Blowout Sale!

You’re all in for a treat from Hisense at its upcoming Birthday Blowout Sale from August 13-17, 2021! The global brand, known for its...

Sanofi celebrates International Self Care Day with Power To Love Yourself Completely Online Event

In celebration of International Self Care Day, Sanofi Philippines held an Instagram Live event called Power to Love Yourself Completely to discuss topics related...

5 Easy Tips to Help You Shop Wisely at the Shopee 8.8 Mega Flash Sale

If you’re an online shopping newbie, or maybe an occasional shopper who struggles to navigate e-commerce platforms, then you’re probably wondering what flash deals...

More Articles Like This