When considering whether or not to refinance your home, you must decide if the refinance will result in a net benefit to you. It is ultimately up to you to decide what is in your best interest, not a loan officer.There are tons of programs which can save you quite a bit of money off of your monthly payment nowadays, even with only a small rate reduction from your current interest rate. An old myth used to be that you should only refinance if you can lower your rate by at least 2%. With interest only loans, 40 year amortization loans, Pay Option ARM's, and debt consolidation and cash out loans you can refinance your home and still realize immediate benefit with only a small reduction in interest rate. Consult your CA mortgage broker to see what mortgage programs you can qualify for and which ones will provide you with the best deal for your unique situation.
When you refinance, you might be able to lower your interest rate and monthly payment -- sometimes significantly. You might also be able to "cash out" some of the built-up equity in your home, which you can use to consolidate debt, improve your home, take a vacation -- whatever! With lower rates and balances, you might also be able to build up home equity faster with a shorter-term new mortgage.
Be careful with debt consolidation refinancing. Sadly, in many cases a family will refinance their mortgage to pay off high interest rate credit card debt only to have these cards maxed out again in just a few months. In this instance the family in question has converted their unsecured credit card debt into a debt secured by the most important thing they own: their home!
Obtaining the ability to defer interest and get a dramatically lower minimum payment option on your mortgage is a popular reason for homeowners to refinance, particularly home owners whose income is derived from bonus income, passive income, long term capital gains, business income or self employed income
If you are simply looking to lower your monthly mortgage payment, you may want to consider what is called a "rate and term" refinance. This simply means that you are refinancing to receive a lower interest rate, and to spread your payments out over a different amount of time. Some people will refinance to change to a 15 year loan, because they want to pay off their mortgage sooner. Most, however, will go with a loan that is amortized over 30 years, because that will result in lower monthly payments.
If you want to eliminate some of your other high interest debt, you can do so by rolling that debt into your current mortgage. This is referred to as a debt consolidation refinance. The benefit of a consolidation refinance is that you can take all of your high interest credit cards, and lower the interest to whatever rate you will be paying on your new mortgage. Also, you have the convenience of only making one payment every month.
Consolidating your debt doesn't actually eliminate it. It simply lumps it all together, and lowers the interest rate that you pay each month.
If you want to cash out some of the equity in your home to make home improvements, take a vacation, buy a new car, or something else, you can. This is called a "cash out" refinance. A responsible loan officer will advise against pulling equity out of your home to reap short term benefits, such as taking a vacation. Although it may be tempting to do so, you will be paying interest on that money, and in the long run you will probably regret it. However, if you want to make home improvements, then you can actually improve the value and beauty of your home by using some of your equity to pay for it.
It is important to know that, although the equity in your home is yours, if you cash-out some of it, it isn't like withdrawing money at the bank. You are taking out a loan against the value of your home. You will pay interest on that loan, and therefore your monthly payments will go up.
Keep in mind that with any type of refinance, you will also have to pay the closing costs on the new loan, which can be around $5,000 to $6,000 or more. You must determine if it is worth it to you to pay these costs in order to reap the benefit of the refinance. A good loan officer will evaluate your situation as well, to determine whether or not it is in your best interest to refinance. Ultimately, though, the decision is yours, and the loan officer is there to help you no matter what decision you make.
Call me today at 888-275-6788 to discuss whether or not a home refinance may be in your best interest. I'm here to help!
Remember that your home and it's equity is your largest asset and savings account. You should only refinance if it is with the right lender, at the right time, and for the right reasons. There are new loan programs coming out all the time, one of these programs may better fit your current financial needs. Discuss the possibility of refinancing with your mortgage broker, and they can give you the additional information that you may need when deciding whether or not to refinance.
If you are a home owner with a sub prime mortgage talk to your mortgage broker about refinancing with a FHA home loan. Many sub prime borrowers will qualify for FHA and financially benefit from the lower interest rates and fixed loan products
