Ask a Designer: How Often Should I Paint and Make Over My House?
Q: How often do you recommend painting and making over your home? —Donna W.
A: Donna, I think with Spring here, your question is very timely. Our homes reach their apex of "clutter" over the holiday season — with all the seasonal decorations, company, and numerous opportunities to entertain. But when the new year rolls around (and especially as Spring approaches), I think we all begin to feel the need to freshen up our homes. Let's answer your question in the three different directions you could take.
This process always feels the most invasive. It brings to mind the removal of most of your furnishings, a kind of "back-to-square-one" mentality. Depending on your lifestyle, I like to see rooms updated every 5 to 10 years. Quite often your style evolves, and decisions that you made several years ago don't feel as "true" now as they did then. Repainting is clearly a part of this process, as well as cleaning, repairing, or replacing furniture and floor coverings that are beginning to show wear and tear.
This one is a favorite of mine. So often in our homes, as new pieces come into the house they just get put in the best place available — and then tend to loiter there. A new piece of artwork will be hung on an open wall or a new decorative accessory gets placed on an open spot on the shelf. When I get in the mood to "re-style," I'll pull everything out of the room — all the accessories, lamps, sometimes I'll even take down all the artwork. Everything just gets stacked on the dining table. Then, with just the furniture in the room I'll double-check the space for traffic flow and adjust the furniture if needed. As each piece is returned to the room, it gives me a great chance to edit my belongings and remove items that are just taking up space. Sometimes items or artwork will be stored away, only to be discovered with delight at a later date! This is often what serves as "spring cleaning" at my house.
This process is much less involved and should happen with a fair amount of regularity. It can be as simple as fresh monogrammed bedding and pillows for your bedroom — like the marvelous bedding in the image above. Maybe the towels in the bath should be replaced. Or changing the scent of your candles to match the season does wonderful things for your home. You know how your car always seems to drive better just after you've taken it to the car wash? This is kind of the same thing for your house!
How soon can you refinance a mortgage after buying a home?
There are no restrictions dictating when you can refinance a mortgage – theoretically, you could refinance the same day you close on your original loan. Appropriate timing, when it comes to refinancing, is about money, and strategy. Just because you can refinance soon after closing doesn’t necessarily mean it’s right for you. So how soon can I refinance?
How long before you can refinance depends on several factors:
Do you have a solid long-term strategy? First and foremost, have you asked yourself why you’re refinancing? Are you trying to lower your rate? Do you need extra cash for home improvements? Are your reasons financially, and logically sound?
Can you use the same lender? Depending on how soon you refinance you might not be able to use your current lender. Switching lenders may result in new closing costs, and other fees. If you’re refinancing for a small decrease in interest, calculate to ensure the decrease will benefit you enough.
Is the money right? Let’s say you currently have a $200,000 mortgage at 5 percent interest, your monthly payments would be around and $1073.64. If you secured a new loan at 3.75 percent you could save about $147.41, monthly, from a refinance.
How does the forecast look? The Mortgage Bankers Association predicts 30-year fixed-rate mortgages will rise gradually over 2017, averaging 4.7 percent in the fourth quarter of 2017. Similarly, the National Association of Realtors anticipates the 30-year fixed to be around 4.6 percent at the end of 2017.
Historic mortgage rate trends from 1960-present (Photo/Wikimedia)
Do you have an ARM loan? Adjustable-rate mortgages can be a nice short-term strategy, however after the initial fixed-rate period ends, ARMs tend to increase. Often, it makes sense to refinance to a fixed rate mortgage even if your payment goes up, especially if you plan to stay in your house for a long period of time. Over the past 30 years, the average rate on a 30-year mortgage has been 8.12 percent based on historical data from the Federal Reserve. As we already mentioned above, economists are predicting a rise in interest this year, too. If you can lock in a lower rate and eliminate the risk of having an ARM which could adjust upwards, it is worth paying a little bit more.
What is your credit score? How soon you can refinance may be out of your hands if your credit score isn’t high enough. The better your credit score, the lower the interest rate you’ll likely be offered. If your credit score needs improvement, take some time to focus on this before moving forward.
Are you able to incur fees? Refinancing comes with a load of paperwork. Each piece of paper may also be associated with a fee: application fees, processing fees, underwriting fees, appraisal fees, and more. It’s wise to understand how many fees you will incur and do the math. Will these all-in costs be a burden to you?
Do you understand amortization? Refinancing carries a hidden cost which comes from the way that mortgages are amortized. Amortization is the process of spreading out payments over time and allocating them between paying interest and paying down the loan’s principal. When a loan is relatively new, you pay a great deal of interest and very little principal. As the loan ages, the interest goes down and your principal payments go up as demonstrated in the table on the right. Every time you refinance your home you restart the clock and pay less principal.
One way to mitigate this problem is to refinance to a shorter-term loan. For instance, a 10-year-old $200,000 30-year mortgage at seven percent carries a monthly payment of $1,331. If you were to refinance the remaining $171,953 balance for 20 years at 5 percent, you would pay the loan off in the same amount of time and save almost $200 a month based on the new payment of $1,135. If you found a lower rate loan, you would save even more.
This makes it take longer to pay off your home. When settling on the final terms for your loan, take this into consideration.
Just as you can refinance whenever you want, there is no limit to how many times you can refinance your home. While there is nothing particularly wrong with refinancing multiple times, it’s worth asking yourself if you’re being intelligent about your decisions. Are you a serial refinancer with bad business sense? Refinances to fund consumer purchases, repeatedly returning to a 30-year amortization, and paying hefty mortgage pre-pay penalties to refinance will offset the benefits of refinancing. These habits should be avoided at all costs. But in theory there is no limit to how often you can refinance your mortgage.
Here are a few more reasons refinancing might not be a smart decisions.
If you plan to move soon. If your loan is just a few years from being paid off, refinancing to save money on interest may wind up costing you more time and money than you expected. You will incur the cost of refinancing up front, and may never receive the benefit of the lower rate.
You’ll incur prepayment penalties or exorbitant loan costs. How long will it take you to recoup the money you spend on your refinance? If you incur a prepayment penalty to get rid of your old mortgage or you need to pay points or fees to get a new mortgage, spending money today to save money in the future is not always a good plan. Ask yourself these questions when you determine the out-of-pocket costs you face:
- Can you wait a short period of time and have the prepayment penalty go away?
- Can you find a different lender who will offer you a comparable rate without you incurring out-of-pocket costs?
- If you will be staying in your home for a long time and can take out a no-cost refinance, it may make sense to refi for an even smaller decrease in interest rate.
Your new loan will require mortgage insurance. Private mortgage insurance typically costs anywhere from .5 to 1 percent of your entire loan amount. If you’re not currently paying PMI, the additional cost may be burdensome to you. Let’s say your new loan is for $200,000, this could mean an additional $2,000 to your expenses each year.
Now that we’ve assessed when refinancing makes sense, let’s explore how to refinance.
Regardless of the timing of your refinance, consider these steps:
- Determine your situation with a mortgage refinance calculator
A more mathematical approach to determine when refinancing makes sense for you is through the use of a mortgage refinance calculator .
For an accurate assessment, make educated guesses about the fees you’ll incur with a refinance, the new interest rate you’ll land, how much money you’ll need to borrow, as well as details about your current loan terms.
A mortgage refinance calculator will inform you of potential monthly savings, and what future payments might look like. This calculation should give you a good idea of what to expect and if refinancing is a solid option for you.
Once you’ve used a retirement calculator to determine loan terms that fit in your budget, it’s time to start asking around. Talk to multiple lenders before making a decision. Credit unions, local banks, and regional banks all offer different products, and often special programs that may benefit you.
Don’t look solely on the rate either, sometimes finding a lender that can offer added value like communication and trust can be beneficial for your financial situation moving forward, too.
When done strategically, refinancing can save you money in the long-run. (Photo/Flickr)
If everything checks out with your current financial situation, and you’ve found a lender you like, let the paperwork begin. Organize your pay stubs, statements, and other specified paperwork to start the loan process.
You’ll have the option to lock your rate which means your lender will give you a set interest rate, at a certain price, for a specific time period. Consider asking your lender, in writing, to lock your rate. Sometimes rate locks cost money and sometimes they don’t.
After the paperwork has been completed, you’ll pay the closing costs and other expenses indicated on your loan estimate, and the process is more or less complete.
Have cash on hand . We’ve spoken about the fees associated with refinancing several times through this article. All of these fees should be listed in your loan estimate, meaning there should be no surprises. Before agreeing to loan terms, double and triple check that the fees are realistic and fair and have the cash on hand to pay for them.
Refinancing, when done for the right reasons, and at the right time can bolster your financial situation.
What About the Hassle Factor (aka the Refinance Enema)?
Part of me didn’t want to refinance for the sake of time and hassle. A huge downside to refinancing a mortgage is all the paperwork. Many mortgage companies have gone completely digital. Mine has, so that saves time. But man, I’ve had to download and upload a shit ton of financial statements. “Last two copies of XYZ bank statements, all pages including blank ones”. “Current lease on the rental property.” etc. The list was 15 items deep.
Including DRIPs, I have quite a few investment and bank accounts. I can quickly provide the balances of everything by logging into Personal Capital. But that’s not good enough for the underwriters. They want visual proof. Thankfully I can print to PDF.
We’re nearing the closing date. A babysitter is booked (for the older kids) and I’ll step away from work one day next week to sign about 50 pages of paperwork with Mrs. RBD and our one-year-old. Total hassle. But to perpetually save $290 a month, it’s still worth it.
I put in less than 10 hours of work to complete the paperwork, email the processors, and sign a bunch of documents. Since we’ll save about $3,400 per year, it’s an excellent return on my time.
Because of the cost and hassle, you should set a limit where the refinance is worth your while. I’ve always aimed to save at least $300 per month. I’m a little below that this time, but it’s a good rule of thumb to follow so I’m not repeatedly refinancing to save $150 or less. The longer-term numbers would still work in my favor, but you have to draw the line somewhere.
Even though I know the refinance will save me a boatload of cash, it still infuriates me to pay for more title insurance, another title exam, an origination fee, local taxes and the various processing fees to get this done. The mortgage closing industry is a racket in my opinion. If someone in the industry is reading this, that may be offensive. But three title exams in five years is not necessary. If the title was clean the first time, it’s still clean.
But that’s the way it works and why I consider the closing costs an investment. Closing costs are part of the process. You gotta suck it up and pay them. Don’t be afraid to ask for discounts or shop around for places to save.
Our original closing costs quote included another appraisal. This was unnecessary since our loan to value (LTV) is well below 80% and we had two other appraisals within five years. That saved us $450. Felt like a victory, even though they probably stuck it to us somewhere else.
Running the numbers doesn’t take much effort. The monthly savings may surprise you. And if the monthly savings is good, the long-term savings is awesome.
The hassle and closing costs of refinancing is a deterrent. But if you think of both your time and the cost to close as an investment with a return, you’ll get over them quickly.
Have you refinanced recently? How much did you save? Do you agree, should I refinance my mortgage again?
Featured Photo via Pixabay CC0 Public Domain