With all time low mortgage interest rates, it’s very important to consider your individual situation. Refinancing now is definitely a smart move if you intend to stay in your home or keep it as a rental for many years. If your only goal is to save on interest charged over the course of the loan, here’s a $20,000+ tip: After refinancing, pay monthly what you now pay – the difference applied specifically to principal – you’ll have your loan paid off much quicker!
Clarify when you plan to sell your home. If you plan to sell your home in 2-5 years, refinancing might wind up being a loss. There are many different perspectives to help determine if your refinance makes sense. For example, if you’re 8 years into a 30 year mortgage, the largest component in reducing your minimum payment could be the re-amortizing of 22 years over 30 years. A face to face office visit with a mortgage professional that reviews a myriad of factors is extremely valuable. Advertising sometimes portrays refinancing a mortgage as a simple “no brainer”. In fact, a mortgage is one of the most serious financial commitments a person makes. If you have an Adjustable Rate Mortgage (ARM), consider refinancing regardless of how long you intend to own your home. Do you see yourself as a landlord, retaining your home as an investment property? Find out what renters are paying to see if market rent might cover your entire monthly payment. Tom Freitag, your mortgage professional can help you understand what constitutes a healthy investment property cash flow.
Set clear goals in your quest to refinance. Know what you want to accomplish. You should have 3 details ironed out before you refinance your mortgage.
- Understand what you currently have (Some clients were sure they had a FIXED loan, only to find out it was an ARM. When will your current loan be paid off?).
- Learn what is available to you (based on your current loan balance, home value, etc. options can be made clear – Loan programs & guidelines have become more restrictive. By consulting with Tom Freitag you’ll know what’s available to you specifically.).
- Know how long you plan to own your property.
Meet with your mortgage professional to help you with steps one and two. It won’t cost you a penny and the advice is literally worth thousands.
Written by Tom Freitag, Loan Consultant – © 2009