Should I refinance? How do I know when it is the right time?

Mortgage and Lending with Luminate Home Loans, Inc. - NMLS# 150953 NMLS# 274125


In today's market, there are many refinance offers being made through all forms of media.  How do you choose which offer is the right one?  Which one is legitimate?  What loan program is right for you?  All of these questions can cause you to quickly become overwhelmed and, though this might be the right time for you, the confusion can cause you to give up and miss out.  Don't be caught in the confusion.  

Follow these simple rules to decide if it is the right time for you and to help you choose which of those options are right for you.


First, ask yourself, "How Can a Refinance Help Me?"

The following is a list of possible benefits of doing a refinance. 

Save more money - Interest rates are at historic low levels.  Your monthly payments will be reduced if you get a low rate or when your loan term is extended.

Convert an ARM to a fixed rate mortgage - Lock in a low rate.  Repay the loan with stable payments.

Eliminate PMI - If your current loan balance is below 80% of your current value, refinance and eliminate PMI.

Pay down your mortgage quickly - Shorten the length of your mortgage by reducing the loan term.  Monthly payments may go up, but you can save more in the overall interest payment.  And, you'll be debt free in a shorter time.

Extra cash now - If you have enough home equity, borrow more than the current loan balance and pay off credit card balances with the extra cash.  Mortgage interest is deductible.  Credit card interest is not.

Consolidate two loans - You can consolidate first and second mortgages if there's enough equity and refinance into a single first mortgage.  You'll most likely have a lower monthly payment.

Next, you will need to take a look at your current situation. 

What is your current loan balance, current payments, current interest rate,  and loan term left to pay?  You will then compare it to the current rates on your desired loan scenario/program.  

In order to make sense, you should be getting a significantly lower rate.  

If your goal is to save money on your monthly payments, determine how much money you would ultimately need to save for the refinance to make sense for you.   As a general guideline, some loan programs will require that you save at least 5% in your monthly payment to qualify.  


Work with a local company.  Make sure you contact a mortgage loan professional to help you work through your specific scenario and help you determine what your best options are.  Working with a local bank or mortgage company is a great way to protect yourself.  When working with a local company, you are able to meet face-to-face and share your information in person.  Though, applications can be taken over the phone or on your local company's website, you are still assured that you are giving your information to a trustworthy source.

Many advertisements, mailers, and even correspondence from your current loan servicer may not be all they are cracked up to be.  It is always best to work with someone you can trust rather than a company that is soliciting your business with advertisements or offers they may not intend to give.  

A good mortgage professional should be able to look at your current situation, assess your financial goals, lay out your specific options, and help you determine which one is the best suited to your needs.

Don't count yourself out if you are upside down in your home.  There are loan programs available that will allow homeowners to refinance without obtaining an appraisal as long as they are bettering their financial position by doing so.  

Credit scores count.  If you've had credit problems in the past, it might make sense to wait a while for your credit score to recover before trying to refinance.  If you don't know what your credit score is, you can call a bank or mortgage lender to find out before moving forward.  They can usually help you and give you advice on what you need to do to put yourself in a position to refinance in the near future.

You owe it to yourself to at least look into refinancing your home.  Refinancing will make sense if you are doing it for the right reasons and at the right time for your financial needs.  


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