When to refinance?

The question: When to refinance should always come up in the home-owners mind before he decides to jump on to a refinance. Several factors can affect the decision based on the circumstances of the home-owner.

Current mortgage rates are much lower than the rate for the existing mortgage. In such a situation, it makes sense to calculate the monthly payment using the new rates. If the new monthly payment is significantly lower, and if the home-owner would like to keep the existing property for more than a few years, it may make sense to refinance.

Home values gone up

If the home value is much higher than the purchase price and the home-owner has two mortgages on the property, it may make sense to combine both mortgages into a single mortgage. This is of course true if the current interest rates are low enough that it makes sense to have a single mortgage with a lower payment than two mortgages with higher payments.

Need Cash for a reason

If your home has enough equity in it and you need cash for some reason, a cash-out refinance may be just the thing you need. A cash-out refinance will provide you with the emergency cash you need at affordable rates provided the interest rates are low. Most common reasons people use cash is for debt consolidation, home improvements, children's education or other personal reasons. Keep in mind that taking cash out from a refinance will increase your principal balance and your monthly payments.

ARM or Option ARM mortgages

If you currently have an ARM mortgage and it is about to reset, depending on your circumstances, home mortgage refinancing or loan modification may be the right option for you. You can get into a 30 year fixed loan and not have to worry about interest rates.

Change in financial circumstances

If you have had a change in your financial situation, refinancing may be the right thing for you. If you bought the house on one income and now have two incomes, it may make sense to get a lower mortgage term. For instance, to go from a 30 year fixed to a 20 or 15 year fixed.

On the other hand, if you bought the house on two incomes, and now have only one income, a loan modification may be a more beneficial option for you.

For additional questions about when to refinance, feel free to contact us and send us your questions.

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