Section 11 _Refinance
Choices: Why & When?
The
following overview is intended to provide homeowners with information
on lowering your mortgage interest rates, and/or consolidating
your high interest credit cards, and other high interest debt
into one loan with one low monthly payment. Further considerations
include home-improvement and shortening the term of your mortgage
to experience significant cost savings.
A. The "BIG 3" to Keep in Mind
Most borrowers wish to achieve one of three
primary goals when refinancing.
Refinance Reason # 1
- The first and most common is to consolidate debt. If you
have large payments on a number of high interest loans and/or
revolving credit cards, you may benefit greatly by refinancing.
Paying off those high interest credit cards and installment
loans, and consolidating your debts into one mortgage with
one overall monthly payment is an option many homeowners
are allowing their equity to accomplish for them. Usually,
interest paid is tax-deductible.
You may well save $200, $300 or more,
every month. In fact, many individuals reduce their overall expenses
by $500, to $700 even $1,000 or more each and every month!
There are long-range planning strategies to implement prior to
initiating a refinance mortgage.
Individual savings potential will depend upon your home's appraised
value, current mortgage and lien payoff(s), and the total dollar
amount of debts. For specific debt consolidation examples, see
Section 12: Debt
Consolidation...DO's & DON'Ts!
Refinance Reason # 2
- The second goal some homeowners
have is to simply lower their current mortgage payment by either
refinancing at a lower rate of interest, thereby lowering their
mortgage payment each month and improving their family budget.
You may also wish to reduce the term of your mortgage saving you
thousands of dollars!
Refinance Reason # 3 -
The third common goal homeowners have is to pay off their current
higher rate mortgage and turn some of their home equity into cash
to use for other purposes. Depending on the current value of your
home and your existing mortgage balance, you may be able to receive
up to $100,000 cash-back to you.
B. Costs of Refinancing
In effect, refinancing is simply replacing one
mortgage with another. The costs of refinancing are typically
similar to the costs of your original loan. Your new loan will
be processed and underwritten in virtually the same manner as
your original purchase loan with the same requirements: Application,
Appraisal, Title Insurance, etc.
The main difference between your new refinance loan and your original
loan, as far as costs go, is that the loan costs can be "rolled
into" the new loan amount and need not be paid out-of-pocket.
Your equity may be paying for you to save money!
C. Let Your Home Help You
You've lived in your home awhile. You clean,
mow, repair & replace…all the Homeowner Maintenance projects
you fit in after work or on the weekend. Perhaps you want to remodel
your kitchen, add a deck, or even put in a pool for you and your
family. If you've lived there for several years, or, if you had
a substantial down payment when you purchased your property, your
home has most likely appreciated (gained value). As a no-cost
client service, we can help you determine your appreciation level
for you and let you know how much equity you can utilize to pay
for home improvement…or just about any other financial need
you may have. Depending on certain variables, the increase in
your monthly mortgage payment may be minimal!
D. Getting Started & "Wait for Your
Window"
Your PreQual-Analysissm is
the ideal option to explore all of the possibilities which may
be available to you. There are "windows of opportunity"
available which you may not have considered which would exceed
your expectations. Additional windows may open to you as market
and economic conditions change.
