Home About Writers Categories Recent Issues Subscribe Contact File Transfer





Michael Gonzales
Real Estate
2008-09-01 15:06:00
When to refinance
Question: Is it still true that the time to refinance is when the rate is 2 points lower than your current mortgage rate?
Answer: As with any type of planning it is never wise to just look at one variable. I would never advise anyone to refinance their home just because the market rate is 2 percentage points lower than their current interest rate. When making this type of decision you must look at the entire picture. To answer this question completely and to give my opinion I would need to know more about your financial position and your goals. A typical conventional 30-year mortgage is amortized so that in the first few years very little is paid towards the principle. The longer you pay on a mortgage the more money will be applied to the principle. Here is a most interesting note: On a 30 year mortgage it will take 20 years to pay half the principle balance off, the remaining half is paid over the last 10 years. This means it may not be wise for someone that has had their home for a few years and is paying more to theprinciple to refinance their home solely because interest rates have dropped 2 percent. Now with that being said, just because you have had your home for a while and have paid down the principle doesn’t necessary mean you shouldn’t look at refinancing as a tool to meet your specific goals. Again you have to look at the entire picture. This would include looking at things like your current debt holdings, interest rates on those debts, cash outflow each month, tax incentives, etc. The important thing is to be up front with the person helping you with this type of transaction. You will also want to make sure he or she is qualified to help answer these types of questions and are really looking at the entire puzzle and not just putting the pieces in place.
 
The Q & A Times Journal accepts no responsibility for unsolicited manuscripts or photographs.Materials will not be returned unless accompanied by a stamped, self-addressed envelope. Thank you.
 
Wildcard SSL Certificates