Should I Refinance My Home? What loan application should be applied?

A couple of years ago I wrote about refinancing a home mortgage, and I said you might consider a refinance if you can get an interest rate under 5%. Right now the interest rate on a 30-year mortgage can be as low as 3.36% and 2.69% for a 15-year loan. These are great rates. The answer on refinance remains, “it depends.” What is your goal? The Omalaina kokemuksia will provide information about what type of loan should be applied for. The period of repayment should be under the consideration of the person while applying for loan application. 

One of my sources is an article entitled “Before You Refinance, Modify Your Loan … If You Can.” (Diana Olick CNBC Real Estate Reporter, June 12, 2012). Some loans can be modified but it depends on the type of loan you have, and your lender, and the knowledge of the person you are talking to. There also is a “recast” which involves a large pay down of the principal, something that most of us can’t afford.

Another source, my Colorado Springs “loan lady,” adds even more factors to the mix. It depends not only on the loan but when the loan was “endorsed” by FHA, if in fact it is an FHA loan. The loan may be serviced or owned by a different financial institution than the place you got it. You want the fees to be low but there are factors such as you can’t roll closing costs into the new loan if you don’t pay for an appraisal, and some banks won’t make loans without an independent appraisal. If you have 10 years to go on your original 30-year mortgage, you don’t want to start a new loan which isn’t paid off until 30 years from now.

My advice is to start the research on a mortgage refinance only if you are in good financial shape and you plan to live in your home at least another 4-5 years. By good financial shape I mean you have a job, you have a budget, there is more money coming in that going out, you pay off your credit card balance each month, you have a substantial emergency fund to pay the monthly mortgage in case income is interrupted, and your credit score is 720 or higher. Know well that mortgages are harder to obtain right now. Banks are being forced to take back bad mortgages they previously sold to Fannie Mae and Freddie Mac and, as a result, the banks have raised the bar on new loans.

At the heart of the decision whether to refinance your mortgage is your goal. What exactly are you trying to accomplish? Most likely, you are trying to reduce your monthly payment, but if you don’t have a solid plan for the saved money, then don’t refinance. A mortgage is a big expense so your goal might be to pay it off early. You can do this by paying a little extra each month or paying the monthly bill in two increments.

Sit down, think in through, then begin your investigation. But don’t delay, act soon, mortgage rates can’t get much lower.