Is it time to refinance your home mortgage?

Is it time to refinance your home mortgage?

Is it time to refinance your home mortgage? How do you know when it is time? Interest rates have improved of late compared to where they were the earlier part of the year. This has brought a lot of lenders out of the woodwork pushing refinancing. Random offers are showing up in the mail. Many are offers that are too good to be true. In spite of being too good to be true a sales person on the other end of the line will often sell a homeowner on refinancing even if it is not the right move.

It may be the right time to refinance depending upon the goal of the home owner. Perhaps the need to refinance is more time sensitive than it is rate sensitive, or the home owner needs cash now. I will go on record to say that overall rates are better at the moment but there will be a lot of sales people who can make it sound much better than it is. I generally measure rates not by what they can be bought down to, but where they are without a huge buy down (by using equity).  A lot of marketing folks are going to use a home owner's equity to get the rate they promote. You can use your equity to refinance and roll closing costs and escrows in. The problem is when you are using thousands of dollars of your equity to save $50/month. 

When approached by a lender wanting you to refinance ask yourself these questions:

1)  If the rate is a 30 Year note is it 1% better than the rate you have now? How much better is the 15 or 20 Year Rate?

2) Are you saving money by going to a shorter term - 30 yrs vs 20yrs? Are you saving substantial money if you have the same rate?

3)  Is the rate better than what you have?

4)  How much more is the new loan amount compared to what you owe? Does the higher loan amount include points?

5)  Do you want to shorten your term? Do you want to lengthen your term?

6)  What are the closing costs? Does it include points?

7)  What is the break even on the savings vs cost?

8)   Do you need cash out?

9)   Does a refinance allow you to switch to a program that is better for any number of reasons? For instance if you have a FHA loan can you switch to a Conventional?

10)  Does a refinance help you eliminate or reduce PMI?

11)   Do you want/need to to consolidate debt?

12)  Who is the lender you are talking to? Did they solicit you with a fast talking sales person or are they taking the time to discover what your goals are?

13)  Are you given options or are you rushed into a loan when another option may be better?

14)   How long are you going to live in the home?

15)  Does your loan amount justify a refinance?

These are some questions one might ask before accepting a refinance. As I mentioned rates are improving but to know if now is the time to take advantage of a refinance or wait for something better one must speak with a trusted adviser who has their best interest in mind. Someone who knows the market, can explain the direction of the market, has a variety of programs, can offer pros and cons of each scenario, can close smoothly and quickly. These are not generally qualities found in the random offers received in the mail. 

If you live in Kentucky or Ohio and want to know if now is the right time to refinance call or email me today. If you want to know you have chosen the correct time, product and term call me or email today.  If you want to know the benefits of waiting call me or email today.