Reasons for Following Through with a Mortgage Refinancing
Andrew Housser is the co-CEO of Freedom Financial Network. In light of how many adjustable home mortgages are bound to reset, he recently offered the following advice.
Go ahead and refinance home loans if …
1. Your ARM rates are rising above market rates. As interest rates increase, adjustable rate mortgage payments do, too. If this is a concern for you, and current fixed rates are lower than your rate, consider refinancing.
Many economists forecast basically stable interest rates through the holidays, but with the amount of uncertainty in financial markets, there’s no way to be sure. You can begin the process with a mortgage lender and have him or her watch rates for you to establish a good time to lock in your loan.
2. You can afford to refinance. Mortgage refinancing involves expenses that can total around 2 percent of the total loan amount. Typically, financial experts suggest refinancing is worthwhile if the savings on payments will pay for the refinancing costs within two years.
Calculate your own “break-even” date by dividing the up-front cost (the figure on your Good Faith Estimate form) by the anticipated monthly savings. The answer is the number of months it will take to pay off the refinance. Sooner is better.
3. You’ve grown roots. If you plan to stay in your home for a long period of time, refinancing can make sense. If you have a long term left on your mortgage payments, and your rate is higher than market rates - or you have an ARM or balloon mortgage and want the security of a fixed rate - you’ll likely meet the “break-even” criteria outlined above.
4. You want to merge loans. If you have a first mortgage and a second mortgage with a high rate, you might want to refinance to combine the two loans into one. Second mortgages usually have adjustable rates. If yours has a hefty balance, you might be better off rolling the two loans into one.
** Speak with our panel of mortgage brokers today. They can help you determine when - and how - you should refinance a home loan in order to save the most time and money.