Is It Time To Refinance?
In this changing market I have been receiving many calls from homeowners asking me if its time for them to refinance their mortgage. As you are aware, many homeowners obtained adjustable rate mortgage loans or interest only mortgage loans during the recent real estate boom in South Florida. Now, there are many reasons that homeowners are deciding to refinance their mortgage loans, including their traditional thirty (30) year loans. It is essential to identify why the homeowners wants or needs to refinance the mortgage before answering the question of whether now is the time to do so.
There are a few typical reasons homeowner's refinance, but the most common are so that the homeowner may lower his/her interest rate, lower the monthly mortgage payment, and to take out cash from the home's equity.
When deciding on whether the interest rate is low enough, some experts feel that the general rule of thumb is that the interest rate should be one (1%) to two (2%) percent lower than your current interest rate. Also note that sometimes the interest rate may not be the deciding factor if the homeowner's monthly mortgage payment is too high or the homeowner has an adjustable rate mortgage.
Homeowner's must spend the time to evaluate their goals- if the homeowner has a need for lower monthly payments either lengthening the loan to a thirty (30) year term, or turning an unpredictable adjustable rate loan into a fixed rate loan may be more important than actually lowering the interest rate by the often cited one (1%) to two (2%) percent.
Many homeowners use the equity in their homes to pull out cash for home remodeling or for consolidating other debts. The benefit of the smart home remodel is that the homeowner may raise the home's value for the future sale. Homeowners must consider carefully the type of remodel they are planning and discuss them with their realtors. Realtors are in the best position to advise the homeowner on which remodels will yield the highest returns at sale.
Additionally, refinancing to consolidate higher interest rate debts, such as credit cards, into one lower monthly payment may make sense for many homeowners. An important result is that the homeowner may receive a tax deduction from the mortgage interest payments that is not available on the interest from the credit card debt. Consult a tax advisor to determine if this is a viable option.
The primary residence continues for most homeowners to be their biggest asset. Stripping out most or all of the equity in their homes may not be the best decision in some cases. In other cases, the homeowner needs cash now, and there will be time to rebuild equity before their house is sold in the future. Homeowners should talk to a professional about this important decision before signing any documents that affect their primary residence. Homeowners must understand what the charges are to refinance and review the closing costs before making the decision.
I work daily with mortgage brokers, lenders and homeowners on these issues. In short, to answer the question posed, "Is it time to refinance?" homeowners must evaluate their reason for the refinance, the costs involved, and all their available options.
posted by fdwvsmr66464 @ 7:38 AM
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