When should you NOT consider refinancing?

Written by Ryan Morgan on . Posted in Refinancing

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If you plan on moving soon

Refinance costs usually take a year or so to pay off before you start saving on your mortgage. If you know that you will be moving before the amount of time it will take you to break even, you should think twice about switching loans.

If your loan carries a prepayment penalty

Some unscrupulous lenders add prepayment penalties to a borrower’s mortgage. These penalties charge you expensive fees if you sell or refinance your home before a certain amount of time (usually 1-5 years). Calculate if your refinancing savings could outweigh these fees.

If you are close to paying off your current mortgage

If you are close to paying off your mortgage, it may make sense to wait instead of refinance. Refinancing can extend the term of your loan and increase your costs.

If you are having financing problems

If you are having major financial problems, you may want to reconsider refinancing as a way to consolidate your debts or borrow money. In some situations, your home could be put at risk if your financial problems continue.

Why should you consider refinancing?

Written by Ryan Morgan on . Posted in Refinancing

To lower your interest rate

Generally, you should consider refinancing if you can lower your interest rate by a significant amount. That number will vary depending on the cost to refinance and the amount of time you plan to spend in your home.  It is possible that you could save a a significant amount of money by refinancing your mortgage.

To switch to a type of loan that is better for you

If you currently have an adjustable rate mortgage (ARM), you may want to switch to a fixed rate mortgage (FRM) in order to lock in a low rate for a long time. Alternately, you may be able to reduce your current payments by switching from a FRM to ARM.

To avoid a balloon payment

Some mortgages have a large payment due at the end of the loan term (usually 5-7 years). You may need to refinance your loan in order to avoid having to pay this “balloon payment.”

To not have to pay private mortgage insurance anymore

Private mortgage insurance (PMI) is sometimes required by lenders if you had to borrow more than 80% of the home’s sale price. If the home’s value has increased, you can use this amount to refinance and stop paying PMI. You may be able to drop your PMI without refinancing, but it is wise to explore the opportunity with your loan officer and determine if you can lower your rate and rid yourself of your PMI.

To cash out home equity

Home equity is often used to finance a remodeling project, college tuition, car purchase, or a vacation. If your home’s value has increased, you can refinance to cash out this extra amount.

To consolidate your debts

If you have a lot of high interest debts, you may be able to save by consolidating these debts into your mortgage. Car Loans, credit cards, second mortgages, and other debts can be included in your refinance.

Refinancing your existing mortgage versus home equity products

Written by Ryan Morgan on . Posted in Refinancing


Good Better Best Keys Represent Ratings And Improvement

This dilemma is very common among homeowners. Most people do not like the idea of going back to a 30 year term when they refinance, which is a valid concern. Each option you will have access to will have it’s own strengths and weaknesses, and it’s important to get sound advice from your loan officer on which may be most appropriate for your goals and needs. The biggest strength to refinancing your existing mortgage, is securing a fixed rate mortgage. You will likely sacrifice in the short term to do this, but it provides protection as you continue to build equity and pay down your mortgage. Most home equity loan programs are based off of prime interest rate, which fluctuates. While this may be a much cheaper solution for the short term, it could potentially lead to an increase in rate and payment in the future.

For someone who is looking for short term debt, a home equity line may be the appropriate tool to achieve that. For someone with a longer horizon, it may make more sense to go with a more conservative approach to your mortgage refinance.

The bottom line is if you are looking to refinance, make sure you examine all options with your loan officer so you can ensure you make the right financial decision to protect your home.
Check out Bankrate’s article on other tips to consider!

When should you consider refinancing?

Written by Ryan Morgan on . Posted in Refinancing


Refinance Calculator How Much Can You Save Mortgage Payment

Every home owner has a unique set of circumstances and needs, the answer to this question may be different for every home owner. There are a variety of reason for refinancing, ranging from lowering your interest rate, shortening your loan term, taking cash out for home improvements and consolidating existing debt, just to name a few.

One of the most important things to consider when you are examining your options, is what the cost of the loan is. On refinances, you are able to roll your closing costs into your loan so there is no “out of pocket” cost. However, be wary! While it may be rolled into your loan, it is still a cost. You may not realize this cost until you go to sell your home, so make sure you look carefully at any fees that you will be responsible for on your refinance. A good rule of thumb to examine is your break even point. You calculate that by taking the cost of the transaction, and dividing it by your monthly savings. For example, if your refinance is going to cost you $3,000 and it saves you $100 per month, you will break even for this move in 30 months.  This is important because you may be in your forever home, or you may be in your starter home and this is extremely important when you examine your refinance options. There are also programs available where you can pay reduced, or even no closing costs for your refinance.

There are many different options available for refinance products, please consult with your loan officer in order to receive sound advice on which programs may be best for you! Check out the Wall Street Journal’s take on refinancing too.

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