When to Refinance your Home….

iStock_000008060318XSmallWhen interest’s rates are low like they are currently, you need to be cautious of ads for mortgage refinance via the mail, TV, and maybe the phone. You probably are asking yourself, when is the best time to refinance my current rate and terms? Please don’t fall prey to the sales calls and ads. If you are not careful, the only person that might benefit from the refinance is the bank. Remember that banks are in business to make money and I think most forget that.

Top reasons to refinance your current mortgage

-          You will be staying in your home for at least 15 years. A refinance typically takes about 7 years just to recover the 3rd party fees applied to your principal note. So if you are in your current home short term don’t refinance your home.

-          Interest rate reduced a minimum of 2% from current rate. If you cannot reduce your current rate 2%, it’s really not worth refinancing your current mortgage because of costs that will be rolled into your loan.

-          You have an escrow shortage and you don’t have the money to cover the shortage. Lots of homeowners get into trouble with not escrowing their taxes and insurance. If you find yourself in this predicament, it is not a bad idea to refinance your home and set up your escrows with the bank.

-          You are getting a divorce. If your spouse is awarded a home in a divorce make sure they refinance that home into there name only. A divorce decree does not protect your credit score, a refinance does. So make sure you refinance your home out of your name if you are not paying the mortgage as a result of a divorce.

-          You’re ARM (Adjustable Rate Mortgage) is set to expire. Again if you are going to be in your home long term and your rate is about to go up due to a ARM loan, you will more than likely need to refinance your home. Typically I would recommend refinancing your mortgage to a fixed rate.

When refinancing your home, make sure you determine if refinancing your home makes financial sense. Don’t fall prey to a refinance sales call or advertisement. Don’t make the mistake of only benefiting the mortgage companies’ pocketbook. I personally will not refinance someone’s home if I can find benefit in it for the homeowner. Unfortunately most mortgage lenders are not honest; they are only interested in a quick buck.

Author: Mike Clover



Comments are closed.

Disclaimer: This information has been compiled and provided by CreditScoreQuick.com as an informational service to the public. While our goal is to provide information that will help consumers to manage their credit and debt, this information should not be considered legal advice. Such advice must be specific to the various circumstances of each person's situation, and the general information provided on these pages should not be used as a substitute for the advice of competent legal counsel.