Homeowners Should You Refinance Your Home? Homeowners Should You Refinance? Homeowners are you considering refinancing your home? There are reasons to refinance and reasons not to refinance.
There are several reasons to refinance
- reduce monthly mortgage payments
- reduce mortgage interest rate
- consolidating a first and second mortgage
- converting from adjustable to fixed mortgage rate
- consolidate debts
- home remodeling or repair
- pull-out cash
Homeowners considering refinancing is a decision only the homeowners can make. June 2015 the interest rates were around 04%. Mortgage rates are low. There are things to consider before refinancing.
Before refinancing consider to refinance and reasons not to refinance:
- Terms on your existing loan(s)?
- Convert from adjustable rate to fixed rate mortgage.
- Consolidate mortgages (example consolidating first and second liens)
- Reminding years on your existing loan?
- If existing loan 10 year or less remaining years and new loan 15-30 years. Does it make sense to refinance?
- Cost of the refinance? What are to total fees for the new loan (points, appraisal, closing costs, etc)?
- Considering lenders fees (closing costs) is the rate of returns after refinance beneficial?
- Compare your existing interest rate to current market rates?
- How long do you plan to own your current property? Selling in 3 years why refinance for 15 to 30 years?
- If you are considering selling your home in next few years does it make sense to refinance NOW?
- Is the value of your property increasing or decreasing? Is the equity in your home enough for a refinance?
- Is there enough home equity for you to be able to refinance the existing home?
- Do you have the available cash necessary for the refinance?
- To get rid of Private Mortgage Insurance (PMI).
- Lower mortgage interest rate should reflect substantial lower monthly payments
- To consolidate debts.
- Convert from an adjustable rate loan to a fixed rate loan.
- Convert from an 30 year loan to a 15 year loan.
- Raise funds for expenses, to purchase another property, or transfer to an savings account.
- Home improvement. Will home improvements increase the value of home.
- Make necessary deferred maintenance on property.
Rules for refinancing if the rate falls more than 2 points below your existing mortgage rate. The closing cost for the refinance (loan origination fee, escrow fees, title fee, etc.) are recuperated. For anything less than 2 percent the savings on your monthly mortgage payments may not be enough to for a refinance. For example estimates, the difference in payments for a $400,000 mortgage at 8.5% ($3.075.00) per month.Compare at 4% is estimate $1,909.00 per month. Estimated savings $13,992.00 per year.
Things to keep in mind
Should You Refinance Your Home? Refinancing usually lengthens the years on your mortgage. If you have 7 years remaining on current mortgage and you refinance with a 30 year loan you will be making payments on the property additional 23 years. In Los Angeles most homeowners do not own a property for 23 years and the savings should be substantial enough to consider a refinance. Using the same scenario if remaining years on loan is 7 years and you plan to sale home in 5 years. Does it make sense to sale? Conversely, you have a first and second trust deeds with high interest rates. It may make sense to consolidate both loans into a first trust deed at an average of 4.5%.
Shop for the best rate and terms. Check with different direct lenders for best interest rates, points origination fees, appraisal costs, processing fees and etc. Above are a few things homeowners should consider when refinancing. Get out your calculator the costs compare current mortgage expenses compared to refinance costs. Consult with your financial adviser or real estate attorney before refinancing.
Buying or Selling Call
Gail Mercedes Cole
Your Westside Homes
Information deemed reliable but not guaranteed. BRE #00788828. I am a Realtor not a lender. Consult with real estate financial advisor or attorney before refinancing.