Refinancing

Today's low mortgage rates make refinancing your home an attractive option for many homeowners.  How do you know if it is the right choice for you?

Conventional wisdom says if you can save 1% or more through a refinance and plan to stay in your home for 2 or more years, a refinance is worth considering.   This is a good rule of thumb but depending on your particular situation, there are other things to consider.

If you are thinking of refinancing, here are a few more questions to ask yourself:

  • Is your current mortgage an Adjustable Rate Mortgage (ARM)?  If you plan to stay in your home past the next adjustment date, you may be able to refinance in a fixed mortgage which will give you a stable mortgage option for the long term.  If you do not plan to be in your home when your ARM adjusts, you may want to forgo the costs of refinancing.
  • Can you reduce the term of your mortgage?  Say you have a 30 year fixed mortgage and have been paying on it for 4 years.  Depending on your rate and balance, you may be able to refinance into a 20 or even 15 year mortgage with little change to your mortgage payment.  By choosing this strategy, you can save thousands in interest and pay off your home even sooner.
  • Are you concerned about your home's value?  The past few years' housing market has left many guessing what their home is worth.  Conventional refinances require at least 5% equity to refinance.  However if you have a FHA or VA loan, you have several options when refinancing.  If you have a FHA loan, you have the option of refinancing without an appraisal.  This is called a FHA Streamline Refinance and can be a great option for this market since it allows you to save money on your mortgage without the worry of getting your home appraised.   We require an appraisal on VA refinances but the good news is you can go up to 100% Loan to Value with a refinance.  Again, this can be worth considering since over time you will save thousands on your mortgage.
  • Do you have a second mortgage with a high rate?  Homeowners with first and second mortgages can also benefit from a refinance.   A refinance can roll both these loans into one mortgage with a lower rate which reduces your payment in the short term and brings significant long term benefits.

As you can see, there are several variables to consider with a refinance.  Please call or email me to have a personalized assessment of your options and best strategy.