Should I refinance my mortgage?

By
Mortgage and Lending with Major Mortgage USA/Branch Manager

 

I get this question to many times a day, but the honest answer isn't so easy.  A lot of Realtors and others will tell you if you can save 1% off our rate then it is a "no brainer".  I will respectfully disagree. 

We need to take a hard look at other factors.

How long are you planning to stay in your home? 

What type of loan do you have now?

Are you paying MI or PMI?

What is your loan to value?

 

So let us play 20 answers or so (you get the idea, plus this make you leave comments)

•1)      If you say to me that you plan to sell as soon as the market recovers------ Do not refinance

•2)       If you say to me that you see 5 to 10 years in this home, then I will say to you that a 3 to 5 year pay back is acceptable.

•3)      If you have a subsidize loan, STOP read your prepayment clause.  Unless you have had the loan for 10 years you will probably pay through the nose.

•4)      If you are at 6% or so and have no MI or PMI STOP.  Most of the country is a declining market.  So talk to a few appraisers and get their honest opinions.

•5)      If you have MI or PMI and your credit score is say under a 680.  Stop your payment will go up even if your rate goes down

•6)      If you have a FHA loan or a USDA Rural Development loan, ask about a streamline refinance.  This might save you if you have had credit issues since the purchase but have been able to keep the house payments current.

•7)      Use basic budgeting skills and also look at amortization charts.  Determine what is best for you and your family.

•8)      Can you use the "savings" to retire higher interest rate debt?  Saving  $100 a month to pay off a 20% credit card might help you better in your long term financial future.

•9)      Are you planning to place the "savings" into your retirement plan?  This might be an acceptable plan, depending on how long you plan to stay in the home.

•10)   You get the idea.  There is no "rule" for refinancing. 

 

AS LONG AS YOU ARE NOT USING YOUR HOME AS AN ATM.

Comments (9)

Sharon Alters
Coldwell Banker Vanguard Realty - 904-673-2308 - Fleming Island, FL
Realtor - Homes for Sale Fleming Island FL

These are very good points to consider when thinking about refinancing your home.

Sharon

Sep 17, 2009 03:27 PM
Richard Dolbeare, R(B)
eXp Realty - Wailuku, HI
R(B), ABR, CRS...Hawaii Multi-Island Specialist

All your points are good ones.  Clearly it makes no sense to refi if you are going to be moving soon.  I'll have a post on that soon.

Sep 17, 2009 03:30 PM
John Rakoci
Eagle Realty - North Myrtle Beach, SC
North Myrtle Beach Coastal Carolinas

Not ALL Realtors are no brainers. Some have learned of many or all the items mentioned long ago. After mentioning then a list is often taken from our files and given to the questioner along with 3 well known lenders.

Sep 17, 2009 03:38 PM
Joe Adams
Major Mortgage USA/Branch Manager - Montrose, CO

John I think you miss read my  statement.  I said a lot of Realtors and others will tell you...... i didnt say all

Sep 17, 2009 05:01 PM
Tom Caulfield
First Financial Lending Corp. - Grosse Pointe, MI

Great points / questions to ask and to consider.  Thanks for the info

Oct 12, 2009 04:47 AM
Ilyce Glink
Think Glink Media - Chicago, IL
Best-selling author, award-winning TV/radio host.

Good post. I just made the decision to refinance my mortgage and I weighed a lot of these options before deciding on a lender.

Nov 30, 2009 06:51 AM
Janet Lyness
First Mortgage Lenders - Knoxville, TN

I have just joined this group which is why my comment is lagging behind others.

That being said-Every point is a good one and any ethical mortgage professional should take the time to ask the questions before telling a client that just lowering the rate is beneficial.

Dec 01, 2009 02:10 AM
Elizabeth Harp, Notary Public Signing Agent
Ozarks Notary Services - Nixa, MO

Hello Joe,

Another point that comes to mind is the possibility of a shorter term.  The 15 and 20 year terms can have a better rate and reduce the amount of time it takes to pay off the loan.  I have had some recent closings where the borrower's are using the favorable rates to reduce the term and save on the amount of interest that is paid over the life of the loan.  There are always a lot of factors to consider.  Great post!

Dec 16, 2009 05:13 AM
Lori Martinez Equal Housing Lender
PEOPLES MORTGAGE CO. AZBK 0904164 NMLS 6274 - Prescott, AZ
Personal Mortgage Professional

Great post with lots of questions to pose to our clients. I really try to push a 15 year fixed refi if my clients are not paying any MI and very little debt. The difference in payment is very little and the sense of satisfaction is huge. Thanks for the great info!

Jan 09, 2010 07:06 AM