Refinance now or forever hold your peace
May 20, 2013
Each and every day we are being bombarded with radio, television and print advertisements telling us we need to refinance today. Interest rates are as low as they have been in many years, so come spend your money with us.
Well let me tell you that most of that is true. Home-mortgage interest rates are really low. Almost as low as they were four years ago, but not as low as they have ever been. Plus, with the hundreds, if not thousands, of variations of mortgage programs it just may be one of the best times to refinance your mortgage. It just may also be one of the best times to buy that new bigger, better home that you have been wanting for so many years.
But buyer beware, there is a cost to all of these programs. And as I have heard from people much, much smarter than I will ever be, there is no free lunch.
For current home-mortgage holders the first thing you need to ask your mortgage professional is how much is the refinance going to cost, in total. And what is the time period to pay back those costs. Since there are numerous costs involved you need to know and see those costs in a written good faith estimate. Even if you ask the mortgage professional to figure those costs into the interest rate, you still need to see a written good faith estimate. In fact, ask your mortgage professional to supply you one GFE at the lowest rate and one with the fees folded into the rate. Then, based on these two written estimates you can determine the pay-back period and really determine if the refinance is worth the time and effort.
To give you an example of how the lower rates can cut your monthly payment, I recently refinanced a homeowner, paid off their car with the cash from the equity in the home and reduced the monthly payment by over $400 a month. The pay-back time on this deal was easily less than a year.
Now on to the type of mortgage program that is best for you. If you plan to only own the home for three to six years you owe it to yourself, and your wallet, to look long and hard at the five-year adjustable rate mortgage. If you believe that you will be in the home until the undertaker comes to get you, and you are not planning to die in the not too distant future, a 30-year fixed-rate mortgage may be best for you.
If you really have no idea on how long you will own the property, look at your past history. Ask yourself questions about your family and financial future. Will you be adding new dependents or will existing ones be going to college? How will changes in your income play on your lifestyle, will you need more room, more places to park your toys? All of these questions should be asked and only you can answer them.
Your final step is to contact your friendly neighborhood mortgage professional to sit down and go over all of these questions and answers. Ask a lot of questions of the mortgage professional and expect honest and straight answers. And most of all, know that whatever you do is to your benefit.
For answers to your mortgage related questions, call Bob Kieber at (970) 453-4700 or email him at email@example.com. Bob is a local mortgage lender with Centennial Bank. He has 30-plus years of professional experience in real estate, finance and investments, and is a longtime resident of the High Country. Member FDIC, Equal Housing Lender. NMLS Bank #401640 Broker #289610. For tax benefit information please consult with a professional tax advisor. The opinions expressed are those of the individual, and do not necessarily reflect those of Centennial Bank.