Kieber: Should you consider a refinance of your mortgage? (column)
I routinely hear from current home owners asking if they should refinance their current mortgage. They may have a short-term adjustable rate mortgage that in a year or two will adjust to the current rates which will most likely be higher than they are today. Others are looking to take cash out to pay for home improvements of just to pay off other debt that has much higher interest rates. For me to give a set answer is just impossible as there are a number of questions to be answered before I can even come close to suggesting a refinance will be best for them.
One of the first questions I ask is how many years do you plan to own that home. If you currently think you will be in that home for ten plus years a refinance may be in your best interests. I also ask what is the term and rate of you current mortgage. If you have a rate three or more points higher than current rates, then yes, it is definitely worth looking into a refinance. If you have a mortgage with twenty five years left and the rate is only a quarter point higher than those we can lock in today, we need to look at the savings per month and then figure out how many months before you break even.
If all looks like a refinance is a possibility, I would then look at your credit history and credit scores. Like a lot of sports the higher the score, the better. Another subject to be reviewed is your employment history. We always look at the most recent two years of your employment. Those that are W-2 employees are much easier to verify employment. Those of you who are self-employed we need to document a minimum of two years of self-employment. And for all borrowers we will need to see the past two years of your federal taxes.
Another big issue that may benefit is you if you have mortgage insurance on your home. Say you have an $80 a month mortgage insurance payment and your home has appreciated to where you have at least a twenty percent equity position, then a refinance could very possibly eliminate that monthly expense.
Robert (Bob) Kieber is a long time resident of the Summit County and has been closing mortgages for over twenty years in Colorado and nationwide. If you have a questions Bob can be contacted at 970-485-1312 or e-mail him at rkieber@boeMortgage.com.
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