Should I Refinance?
Deciding whether or not you should refinance depends on
your personal financial situation. If interest rates are lower
today than they were when you first took out your mortgage,
refinancing makes sense. Or, if you bought your home with
an adjustable rate mortgage (ARM) and are now afraid that
any movement in interest rates may cause your mortgage
cost to go up, you should consider a refinance.
Deciding whether or not you should refinance depends on
your personal financial situation. If interest rates are lower
today than they were when you first took out your mortgage,
refinancing makes sense. Or, if you bought your home with
an adjustable rate mortgage (ARM) and are now afraid that
any movement in interest rates may cause your mortgage
cost to go up, you should consider a refinance.
Refinancing a mortgage in order to pay off debt is a common strategy. Many homeowners use the financial disaster if done incorrectly
or without discipline. The homeowner needs to be aware of the risks and understand the pros and cons of consolidating debt with a
mortgage refinance.
Pros
There are some good points to paying off other debt by refinancing a mortgage. One is that usually a mortgage has a lower interest rate than other
debt. If you have a car loan or credit card debt, the interest rates could easily be twice that of your mortgage rate. By refinancing and consolidating
debt, you will see immediate monthly savings in your payments. Another pro is that you will eliminate multiple bills. It can be confusing trying to pay
several credit cards and car loans that are all due on a different day of the month. If you consolidate, you will need to pay only one bill every month,
which is your mortgage. One of the biggest pros is the tax benefit. Mortgage interest is tax deductible. So are certain fees involved with the closing,
like prepaid points. By consolidating your debt, you are taking mounds of debt that are not tax deductible and rolling them into a debt that is tax
deductible. You will see significant savings in your tax returns, especially if you have a large amount of debt.
or without discipline. The homeowner needs to be aware of the risks and understand the pros and cons of consolidating debt with a
mortgage refinance.
Pros
There are some good points to paying off other debt by refinancing a mortgage. One is that usually a mortgage has a lower interest rate than other
debt. If you have a car loan or credit card debt, the interest rates could easily be twice that of your mortgage rate. By refinancing and consolidating
debt, you will see immediate monthly savings in your payments. Another pro is that you will eliminate multiple bills. It can be confusing trying to pay
several credit cards and car loans that are all due on a different day of the month. If you consolidate, you will need to pay only one bill every month,
which is your mortgage. One of the biggest pros is the tax benefit. Mortgage interest is tax deductible. So are certain fees involved with the closing,
like prepaid points. By consolidating your debt, you are taking mounds of debt that are not tax deductible and rolling them into a debt that is tax
deductible. You will see significant savings in your tax returns, especially if you have a large amount of debt.
ARE YOU IN THE KNOW?
Programs At A Glance
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program comparison chart to decide
which program is best for you.
Loan Application Checklist
Refer to this list while gathering your
financials when you apply for a
mortgage.
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What is a TIL? APR? GFE?
How To Avoid Problems At Close
Quick tips to streamline your escrow
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effected according to the manner you
choose to hold title.
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Closing Document Signing
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Familiarize yourself with the closing
process and avoid the stress.
Other Informational Links
By carefully considering the above factors and seeking our professional advice, you should be able to select the loan that financially suits your
intentions with the property.
More Loan Products and Programs
intentions with the property.
More Loan Products and Programs
Cons
There are cons to refinancing your mortgage in order to pay off debt. One is the
possibility of overspending. If you have large amounts of credit card debt because of
buying things you can't afford, then you will likely pay the cards off in the refinance
and charge them back up down the road. You will feel that you are no longer in debt,
when in reality, you just transferred the debt to another loan. So you must have
discipline in order to prevent this situation. Another downside to consolidating your
debt is that you are spreading the debt out over 30 years. A typical mortgage is 30
years long, and when you add that debt to your mortgage, you will be paying those
credit cards for 30 years to come. This means that in the end, you will have paid
more than if you paid each credit card on its own. And lastly, a big negative to
consolidating debt into a mortgage is the possibility of a foreclosure. If you increase
your loan amount, you may be unable to afford the new payment. You have now tied
your debt to your home, which could have a bad outcome in the future.
Real Estate Broker - CA Dept. of Real Estate License #01906363 | Malaga Funding, Inc.
NMLS# 872515 | NMLS Consumer Access: http://www.nmlsconsumeraccess.org
NMLS# 872515 | NMLS Consumer Access: http://www.nmlsconsumeraccess.org
| Andrea Dobrick | NMLS# 267223 Jose S. Gomez | NMLS# 262949 |
| RESIDENTIAL AND COMMERCIAL REAL ESTATE FINANCING |
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| Info@MalagaFunding.com |
| 350 West 5th Street Suite 206 San Pedro, CA 90731 |
FAQs and How Tos
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| 310.514.8799 |
Tightened Lending Requirements
It should be understood that as lenders have tightened their requirements and made credit more difficult to obtain,
borrowers who got caught up in some of the excesses of the credit crisis may have allowed their credit scores to fall.
Lenders will take a hard look at credit and if your credit falls below their acceptable range for lending, you will be
denied a loan. It is important that borrowers understand their financial situation and clear up any troubling issues that
they can in order to qualify for a refinanced loan at the lowest possible rate.
Compare the Old Loan Versus the New Loan
Working with a trained professional will help you avoid any pitfalls associated with refinancing your loan and allow you
to receive the best deal. You want to compare your current rate to the new rate and be sure there is a significant
reduction.
Also, you should review the loan amounts of the old and new loans. Many times, the costs of the loan are rolled into
the loan, significantly increasing the new loan amount.
It should be understood that as lenders have tightened their requirements and made credit more difficult to obtain,
borrowers who got caught up in some of the excesses of the credit crisis may have allowed their credit scores to fall.
Lenders will take a hard look at credit and if your credit falls below their acceptable range for lending, you will be
denied a loan. It is important that borrowers understand their financial situation and clear up any troubling issues that
they can in order to qualify for a refinanced loan at the lowest possible rate.
Compare the Old Loan Versus the New Loan
Working with a trained professional will help you avoid any pitfalls associated with refinancing your loan and allow you
to receive the best deal. You want to compare your current rate to the new rate and be sure there is a significant
reduction.
Also, you should review the loan amounts of the old and new loans. Many times, the costs of the loan are rolled into
the loan, significantly increasing the new loan amount.
Will Refinancing Improve Your Situation?
Making the decision to refinance a mortgage loan is based on how refinancing will improve your present loan situation.
This requires some careful consideration. A seasoned professional who can show you the difference refinancing can
make to your monthly costs is your best guide.
The “timing” for refinancing is created by understanding interest rates for mortgages and how they move. With little
movement in the sale of houses for awhile, the rates for mortgages have been fairly level or flat.
Making the decision to refinance a mortgage loan is based on how refinancing will improve your present loan situation.
This requires some careful consideration. A seasoned professional who can show you the difference refinancing can
make to your monthly costs is your best guide.
The “timing” for refinancing is created by understanding interest rates for mortgages and how they move. With little
movement in the sale of houses for awhile, the rates for mortgages have been fairly level or flat.
As the economy recovers from a near financial meltdown,
interest rates for new and existing homes will increase. As
the buying increases, homeowners should see higher
interest rates. The higher rates are a consequence of the
housing market demand. Before rates shoot up too far, a
homeowner looking to refinance should have determined if
they qualify.
The third important factor to consider is the payment terms
of the loan. For example, if you have a 30-year mortgage,
but have had it for ten years, you have a remaining 20-year
mortgage. If you refinance to a new 30-year mortgage, you
add interest to your mortgage over those ten years.
