Murrieta News: The Do’s And Don’ts of Home Refinancing Over Age 50.
Nearing retirement? Thinking of taking advantage of the incredibly low mortgage rates to refinance your home? If so, here are a few do’s and don’ts that financial planners suggest you consider:
DON'T use the extra money to take on more risk. Some people are tempted to refinance so they can put the extra monthly "savings" into another investment like the stock market. But while the stock market has historically generated high returns (the average annual gain of the S&P 500 from 1926 to 2010 was 9.8%), to get those kinds of returns, investors may need to stay in the market for decades. So if you’re less than 10 years from retirement, don’t use that extra monthly “savings” from a refi for a stock-heavy investment.
DO think about whether you'll move. If you don’t plan to stay in the house long enough to recoup the closing costs – typically about three years – consider skipping a refi. BUT if you're planning to move in, say, five years or more, and your finances are stable, refinancing could help you buy that retirement home now. Since prices in many popular retirement areas are still depressed, this might be a good time to score a deal on a second home and rent it out until you retire. (Just be careful of the tax implications of rental income).
DON’T use the excuse, "I'll work longer." Extending the term of your mortgage can be a risky proposition for the over-50 crowd. The unemployment rate for workers ages 55 and older hit a record high in December 2009 at 7.2% and has hovered near that level all year. For those 65 and older, the unemployment rate is 7.6% - nearly double what it was just five years ago. And it currently takes 35.5 weeks for those over 55 to find a job once laid off - more than five weeks longer than their younger counterparts.
DO refinance if you need the cash. Considering a refi that lowers monthly payments (even if it extends the term of your loan) may make sense if you need this cash for essentials like health care costs. But don’t fool yourself: Travel and weekly steak dinners at your favorite restaurant are not essentials.
DO opt for a 15-year term if you can. With a 15-year term, you'll pay much less in interest over the life of the loan. Chances are that if you refinance a mortgage for a 30-year term, you will pay more than double what you'd pay had you opted for a 15-year term.
Source: SmartMoney, November 2, 2010, available from "Should You Refinance if You're Over 50?" by Catey Hill; Internet; Accessed November 9, 2010. Note: I am not licensed as an accountant or financial planner. Consult with your CPA or CFP (Certified Financial Planner) to understand your options, as well as the impact of refinancing your home.
Want to know the instant that a Murrieta home is listed for sale? As a free service, I will set up automated home searches for you. Click here to discover how easy it is to find your dream home.
Or, to set up your free automated home search right now, please contact me, Bill the Murrieta Broker, by phone or text at (951) 347-3818, or email me at Bill@my3BRealty.com. All I need to know are the features you want in your ideal home, plus the email address that you want your searches automatically sent to.
Contact me today to setup your free automated “Murrieta Homes for Sale” search.
Murrieta is a young, affluent community, boasting an educated, high-income population that's comparable to communities in San Diego and Orange Counties. Murrieta offers a wide range of new shopping, dining and recreational options, a diverse choice in housing, and a world-class education system. Incorporated in 1991 and with a population of just over 100,000, Murrieta was recently recognized as the safest city in Riverside and San Diego Counties.
Cradled within the junction of the I-15 and I-215 freeways, Murrieta is centrally located to businesses in Riverside, San Diego, Los Angeles, and Orange Counties. New retail centers, industrial buildings, and Class A offices have been completed with more in the planning process. With over 2,000 acres of additional available land, Murrieta is attracting upscale retail centers and quality hotels, as well as research and development/medical technology firms and first-rate healthcare facilities. Murrieta is an ideal place to locate, invest, develop and expand as it is destined to become the premier business hub for the region.
Please subscribe to my blog, Bill the Murrieta Broker, for up-to-date information about Murrieta home price trends, the price trends for Murrieta condos and townhomes, and for Murrieta Open Houses, as well as for Greer Ranch homes for sale and Greer Ranch home price trends, or contact me by phone or text at (951) 347-3818, or email me at Bill@my3BRealty.com.
Comments(5)