Refinance Your Mortgage Now: Top 6 Reasons!

Allison Gervais

Lower Rates Aren’t the Only Perk to Refinancing In Today’s Market!

The media is making it sound like everyone is “under water” on their home loans with news of declining values and high mortgage balances.  While this is the case with some, many people still have equity in their homes. 

by Allison Gervais
San Francisco Mortgage Loan Consultant

They say, “I already have a low enough rate so why bother to refinance and have to deal with all the paperwork again?” 

Is a few hours of your time gathering and signing paperwork worth thousands of dollars saved?  Lowering your rate by just .25% could do just that over a few years time. 

1.   Lower Rate:  As of August, 2010, if your rate is higher than 5% you should contact your mortgage broker to see if you could refinance to a lower rate.  Don’t forget to consider costs and how long you plan to own the home to properly factor in savings.

2.   Divorce:  Not many divorced people continue to live together.  A refinance removes the absent former spouse from the mortgage obligation.  It also gives the option to take cash out to use for the divorce settlement.

3.   Ditch Your ARM:  The hottest product in former years was the hybrid arm.  This loan stays fixed for a period of time then turns adjustable.  The loan still exists and is a good option for anyone not planning on owning their home longer than the fixed portion of the loan.  On the flip side, many people took this loan because it was cheaper and the fixed rates were higher.  Now fixed rates are drastically low, people are going for stability and switching their ARMS to fixed rates.

4.   Consolidate Your Equity Line:  The Prime Rate is 3.25% which makes it so tempting to keep debt on an equity line of credit.  (Rates are typically Prime + 1%)  Cautious borrowers understand these low rates aren’t forever and worry in 6 or 7 years their equity line rates could jump up to 12% or more.  Many homeowners are opting to keep their lines open for emergency use only and consolidating as much as they can onto a new first mortgage while fixed rates are low. 

5.   Consolidate Your Debt:  Credit card debt, car loans, student loans… add up.  By consolidating these debts into a mortgage, your overall payment reduces, saving people hundreds of dollars per month.  In addition there can be tax advantages.  If you can’t pay off debt quickly, this is the next best move.

6.   Cash Out to Buy Property:  Now is an excellent time to buy considering the recent decline in the market and extremely low rates.  If you’ve ever wanted to purchase rental property or a vacation property, now is the time.  You typically need 25% down payment to purchase a rental property and could take that cash out of your primary residence. 

If you are in any of the above situations, it would be a good idea to talk to an experienced mortgage broker, such as myself, to see if you could save (or make) money.

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Tags: family, Home, Money, Real Estate, wealth

Category: Real Estate