10 Things to think about before you refinance your home..

10 Things to think about before you refinance your home.

When you refinance your current mortgage, you are trading your old mortgage for a new and improved mortgage. Generally, there are only a few out-of-pocket expenses, you most likely will need a new appraisal of the property to determine the market value. There can be several reasons and benefits to refinancing your current mortgage such as: -Lower your interest rate -Reduce your loan term, some mortgage lenders will allow you to select a mortgage term from as little as 8 years all the way to 30 years. Even if you only plan on living in your current home for 5 years, if you refinance your home to a 15-year mortgage, your balance will be a lot less than if you stayed with a 30-year mortgage. -Get a cash out to consolidate other higher cost loans. -If the property was inherited you can buy out others (restrictions apply). -Did you just get divorced and need to refinance the mortgage just in your name? -Home improvements.

Before you refinance your home here are the top ten things to think about:

1) If you are only looking at an interest rate reduction is the savings going to be to be enough to justify the expense? It cost money to refinance; will you be saving enough?

2) Are you going from a fixed rate mortgage to an adjustable-rate mortgage? Yes adjustable-rate mortgages are once again available and the rates are cheaper than a fixed rate mortgage. But mortgage rates look like they bottomed out, take advantage of these low fixed rates and lock them in.

3) Are you adding years back to your mortgage? If you are 4 years into a 30-year mortgage and you can afford the payment don’t go back to a 30-year mortgage if you don’t have to. See if you feel comfortable with a 26-year term or less.

4) Is your credit score high enough to get the best possible rate? You could be 2 points away from a better score. Your lenders should be able to tell you your potential new score and what you can pay down to increase your score. 5) Do you have enough equity in your home to see a real value?

6) Do you have enough income for a new loan? FHA and VA streamline loans do not require income verifications and in some case not even a new real estate appraisal.

7) How long do you plan on owning this property? How many months will it take you to recover the cost of a refinance? If it’s going to take 48 months to recover your refinance and you plan on moving in 36 months. Then you may be better off keeping your current mortgage.

8) Are you currently paying PMI will the new loan eliminate your PMI payment?

9) Are you planning on access equity for home repairs and debt consolidations? It can be a good idea as long as you are using the equity wisely.

10) Are you going to be rolling your escrow into your new loan? If you escrow your tax and insurance (you pay extra every month and have your lender pay your tax and insurance on your behalf when due) your new lender is going to require you to establish a new account. If you have the money, bring that money to the closing and pay for it out of pocket. Your old lender will send you a refund check after closing and refund the amount your currently have in your escrow account. The benefit is that your loan amount will be slightly lower and save you from paying interest on that money.

A qualified Loan Originator should explore all the different mortgage solutions that exist and help you navigate the different types of loans that are available.

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