There’s no place like home for the holidays.  There’s even a song about it.  The thing is, if that home is so expensive that you are house poor, it can ruin your holidays with stress.  To enjoy your home, you need to figure out how to afford it.

Home refinance applications are down from last week.  Interest rates are virtually the same, but maybe folks are focused on the holidays in the final days preceding Hanukkah and Christmas.  But if you are living paycheck to paycheck, the best gift you might give yourself this holiday season, is to refinance into both a better interest rate and better payments.

There are different reasons homeowners want to refinance their mortgages.  Some want monthly savings.  Some want a shorter loan term so the loan is paid off prior to planned retirement.  Some want to take equity out of their home to pay off crippling consumer debt.  Depending on how much equity is in your home, there are different mortgage programs for each.

Getting Monthly Savings.  If your goal is to reduce the amount paid each month on your mortgage principal, interest, taxes and insurance (and association dues if your home is in an association); you may be interested in a no-cash out or limited cash out Rate and Term mortgage.  Sometimes it makes sense to stretch out the payments for 20 or 30 years if you are not creating future hardship for yourself.  With a lower interest rate, and a longer term you can finally afford to pay the housing costs and relax at home too.   

Please note: If you have only been paying on your home for less than a year and are not reducing the interest rate by at least one percent, this may not be a great solution for you.  You may need to look at other expenses you are carrying and figure out how to reduce those.

A Shorter Loan Term.  If you are planning to retire in 5 years but you have mortgage payments stretching for the next 25 or more years, you might be interested in refinancing into a  10 or 15 year fixed rate mortgage.  The interest rates on a fifteen year note are often better than those on a thirty year note, and you can save thousands of dollars by committing to repaying the note in a shorter period.  Look at how many years are left on your mortgage compared to when you plan to retire.  Are they aligned?  Would the higher payment create hardship today?  If not, this might be a good time to consider reducing your loan term through a rate and term refinance.

Consolidate Crippling Debt.  It is not always a good idea to roll your credit card debt into your mortgage, but if you are committed to changing your spending habits, and cutting or locking up those cards so you don’t use them, a debt consolidation refinance loan may help you.  Sometimes you just can’t crawl out of the monthly cash flow deficit you are in, even without new spending.  If that is true for you, and if you do have equity in your home, a debt consolidation mortgage loan may be able to give you the fresh start you need.  It is important to consider what your new monthly housing and total expense will be compared to your income, and whether it will actually improve your situation.  It is also important to consider whether the new loan will make life easier now only to create new problems down the road.  If you continue to use the credit cards you pay off, you will still struggle with the debt without the option of using your home’s equity.

While application are low, banks may be able to take more time to work with you on your home mortgage goals.  Application processing is smoother today, when many lenders accept supporting documents via their lender portal.  You may not even have to scan documents.  If you can download payroll and bank statements to a pdf on your device, you can then upload those documents to the portal.  Just be sure to follow up with your lender contact to verify they have been received.  Visit homerefinetwork.com to find a licensed mortgage professional in your area who can answer the questions you may have.