Back in 2020 (and 2021), we refinanced our mortgage to get those really low interest rates. At first we refinanced our 30-year down to a 15-year because the rates were low. As the rates lowered more, we refinanced back out of a 15-year to a 30-year. The reason was simple, the rates were below 3% and the money I would have saved each month going back to a 30-year was going to be invested (and it has).
Either way, we refinanced out from Wells Fargo to Rocket Mortgage. They made the process extremely simple and fast. Since I’m self-employed, I had all the documents they needed and could upload it right into their portal. It took less than 3 hours of total work on my end for the entire process. Smooth!
Loving Our Low Mortgage Rate
I do love our low 2.7% rate for our 30-year mortgage. I earn more than that in our high-interest savings account (if you don’t have one, get one), so I’m sticking with just paying the mortgage bi-weekly every month and earning more in my savings to hold some cash. This is how I like it and some might not agree.
It’s been over a year with this low rate and with the lower monthly payment, our mortgage is now our second largest bill, instead of our largest. Healthcare is our largest (boo).
We have an account at CIT and they make it really easy to earn good interest and they keep competitive with other banks. You can have an account setup in minutes and customer service is easy to deal with. With a low initial deposit, this is our favorite bank for saving money.
But this low rate h as enticed Rocket Mortgage to call us ever so much to try to get us to do a cash-out refinance, but I just won’t do it.
What is a Cash-Out Refinance?
For those who don’t know, cash-out refinances are simple really. They take the equity in your home (how much your home is worth vs. how much you owe) and will loan you up to 80% of the value of your home. So for instance, if our home was worth $500,000 and we owed $200,000, then we have $300,000 in equity.
For these numbers, you could, in theory, get a cash-out refinance for $240,000 and the bank would cut you a check for that amount. But all you are doing is adding the $240,000 back onto the mortgage for 30 years or the length of time you pick for the refinance.
These refinances do come with fees and closing costs typically, but if you wanted to do a remodel or use this method to buy some real estate rentals (this is a good method for those who have discipline), then you could walk away with cash to use for those purposes. Some even use the lower interest cash out money to pay off higher interest debt like credit card balances or auto loans.
But your monthly payment will be higher due to the higher mortgage balance, so you have to pay attention to your numbers.
Rocket Mortgage Wants My Money
With a sub-3% rate, I don’t have any plans on doing a cash-out refinance and the main reason is due to the massive increase in mortgage rates (as the time of this writing). They are hovering around 7% currently.
If I were to do a cash-out refinance right now, I would be basically more than doubling our monthly costs to get the cash and paying a 7% rate for 30-years unless the rates drop substantially and I do another refinance (this just adds more costs and another 30-years).
Rocket mortgage now calls me every month to do an “account” checkup to see if we wanted to use the equity in our home to do any renovations. I don’t currently have any plans for this, but I also do not want to go crazy and jack up my rates and monthly payments.
If I was going to cash out refinance, I would have done it already Rocket Mortgage. You don’t have to call me asking. I like saving money, I don’t like giving the bank more than I need to.
But with the news of them struggling due to the effective “dry up” of refinances, I can see we will be getting a lot more calls in the future.
I will just keep telling them “no” and see if they get it.