Why Should I Refinance My Home?

I receive this question quite often – Why Should I Refinance My Home?  Whether you live in Texas or anywhere else, this is a valid question.  Don’t just rely on anyone answering this question, you should consult a professional.  Refinancing your mortgage is a big step, but how do you decide when to do it?  I like to give my clients some tips to help them decide when the time is right for them.

Its no secret.  Everyone has been talking about the rates – “The rates are at an all time low.” or “Rates are at historic lows”.  This is probably the first reason my clients decide to refinance.  They hear it enough and want to know if refinancing would result in a lower monthly payments. Generally, if rates drop 1 percent or more – it’s a good time to refinance.  But lowering your rate is not the only reason to refinance your home.

Perhaps you were thinking about refinancing because you need extra money.  College tuition or a high interest credit card?  When refinancing to a lower rate and payment the money you save can be spent elsewhere.

One of the best reasons to refinance is because a client wants to reduce the term of their loan.  Many of my clients refinance to save money over the life of their loan. For example, if you currently have a 30-year loan and you refinance to a 15-year loan, after you refinance you may have a higher monthly payment but you will pay off your loan quicker.  I recently refinanced my home to a lower rate and shorter term.  The payment is slightly higher, but I am saving over $122,000 in interest.

Do you have an Adjustable Rate Mortgage (ARM)?  I strongly recommend refinancing if you have an ARM loan.  Convert it to a fixed rate loan.  Right now, fixed rate mortgages are lower than adjustable rates and a fixed rate mortgage leaves out the ‘element of surprise’ when the adjustment happens every 6 months to 1 year.  If the rates are lower than they were when you got your loan, switching to a fixed rate mortgage can offer more security and stability as well as save you money!

The last reason some clients look to refinance is to consolidate debt.  Loans such as second mortgages, credit lines, student loans and credit cards can often be consolidated when you refinance.  In Texas, we do have regulations for completing a Texas Cashout.  I’ll be putting a post together for those as well.  Watch for them on my outside blog www.FriscoTexasMortgage.com.  Plus, consolidating your debt can result in tax savings, since consumer loans are not tax deductible, but a mortgage loan is tax deductible.  For a better understanding, please consult a Tax Advisor.

Fortunately, rates are still low today, but no one knows how long they’ll stay that way. If you’ve been thinking about refinancing your mortgage, give me a call today. I’ll work with you to find a great rate so you can have more money in your pocket in 2009!