Considering a Mortgage Refinance?

Some Valuable Tips to Know

When considering a mortgage refinance, remember it is much like the mortgage when you first financed your purchase.  Be sure to weight the combination mortgage costs, balanced with a lower or higher interest rate, a shorter or longer term and/or a lower or higher monthly payments. All of which you should leave you better off in the future than you are right now and saving you money in the process.

Because a refinance does involve costs and fees, sometimes the savings are just not enough to justify the refinancing. You will encounter the same type of processes that you did with your first mortgage, and therefore many identical costs. This includes closing fees, broker or lender fees, underwriting fees, and more.

When cosidering a mortgage refinance, let’s start off by killing an old wives tale – it does make sense to refinance your current mortgage even if the new interest rate is not less than two percentage points. This was true in the seventies and early eighties when your choice was limited to only a rate and term refinance.

Rate and Term Refinance

Obviously if you can either lower your interest rate and/or shorten the term of your loan at a reasonable return of your investment, you should consider it. When considering a mortgage refinance think how long you want to live in the house: the shorter the time, consider the lower cost to no cost refinance. If you have no intentions of leaving any time soom, then consider getting the lowest rate and/or term you can afford.

Change of Mortgage Type

If you got into an adjustable when rates were low and stable, it was a great loan then. Now that rates have gone up, so has your interest rate and probably your payment too. This happens when you opt to share the risk with the lender by adjusting with the market. Going to a stable fixed rate or hybrid adjustable might good sense for you now, especially if you have an Option ARM.

When considering a mortgage refinance, going from a fixed to an adjustable could make great sense for you too.  If you have high but erratic income flows, an adjustable, especially an Option ARM works well.

You make the lower monthly payment even with negative amortization but then make up the difference when you get paid and then some.

Hybrid ARMs

The perfect “tweener” mortgage, a great loan when cosidering a mortgage refinance. This may happen to fit you and lot more people today as you know the current home may suit you fine for right now but may want to move in the next three to seven years.

You know that your home is your biggest savings account and you periodically make a “cash withdrawal” with a cash out refinance.

Cash Flow Maximizer

Speaking of cash-out refinances, a great change in the marketplace is thinking of your home as a cash flow maximizer. That is, using the equity in your home to pay off other debts or to make other investments.

In this case, you may find yourself with a higher interest rate and a larger mortgage, but your cash flow as been substantially reduced by paying off debts that you cannot write off for tax purposes or have invested in higher yielding investments.

The fifth condition when considering a mortgage refinance is if you want to take out equity to make a major purchase, send a kid to college, or make improvements on your home. By refinancing, you can use the equity built up in the house towards these things. This is a major benefit of owning your own home.

If you fall under any of these conditions, do some research here and see if refinancing is right for your financial situation. Always do the math and see if you are really going to save money versus the expenses of refinancing.  When considering a mortgage refinance, there's a lot to know so feel free to click on any of the following for more information:

Why Refinance Now

When To Refinance

Eliminating Mortgage Insurance

Refinancing Options

Paying Off Your Loan Early

Homeowner Deductions

Mortgage Servicing

Mortgage Saving Tips

Mortgage Tuneup