Are you Considering Refinancing?
Posted on August 31, 2006 in the Refinancing category
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Homeowners who are considering re-financing their home may have a wealth of options available to them. However, these same homeowners may find themselves feeling overwhelmed by this wealth of options. This process doesn’t have to be so difficult though. Homeowners can greatly assist themselves in the process by taking a few simple steps. First the homeowner should determine his refinancing goals. Next the homeowner should consult with a re-financing expert and finally the homeowner should be aware that re-financing is not always the best solution.
Determine Your Goals for Re-Financing
The first step in any re-financing process should be for the homeowner to determine his goals and why he is considering re-financing. There are many different answers to this question and none of the answers are necessarily right or wrong. The most important thing is that the homeowner is making a decision which helps him achieve his financial goals. While there are no right or wrong answer to why re-financing should be considered there are, however, certain reasons for re-financing which are very common. These reasons include:
* Reducing monthly mortgage payments
* Consolidating existing debts
* Reducing the amount of interest paid over the course of the loan
* Repaying the loan quicker
* Gaining equity quicker
Although the reasons listed above are not the only reason homeowners might consider re-financing, they are some of the most popular reasons. They are included in this article for the purpose of getting the reader thinking. The reader may find their mortgage re-financing strategy fits into one of the above goals or they may have a completely different reason for wanting to re-finance. The reason for wanting to re-finance is not as important as determining this reason. This is because a homeowner, or even a financial advisor, will have a difficult time determining the best re-financing option for a homeowner if he does not know the goals of the homeowner.
Consult with a Re-Financing Expert
Once a homeowner has figured out why they want to re-finance, the homeowner should consider meeting with a re-financing expert to determine the best refinancing strategy. This will likely be a strategy which is financially sound but is also still geared to meeting the needs of the homeowner.
Homeowners who feel as though they are particularly well versed in the subject of re-financing might consider skipping the option of consulting with a re-financing expert. However, this is not recommended because even the most educated homeowner may not be aware of the newest re-financing options being offered by lenders.
While not understanding all the options may not seem like a big deal, it can have a significant impact. Homeowners may not even be aware of mistakes they are making but they may here of friends who re-financed under similar conditions and receive more favorable terms. Hearing these scenarios can be quite disheartening for some homeowners especially if they could have saved considerably more while re-financing.
Consider Not Re-Financing as a Viable Option
Homeowners who are considering re-financing may realize the importance of evaluating a number of different re-financing options to determine which option is best but these same homeowners may not realize they should also carefully consider not re-financing as an option. This is often referred to as the “do nothing†option because it refers to the conditions which will exist if the homeowner does not make a change in their mortgage situation.
For each re-financing option considered, the homeowner should determine the estimated monthly payment, amount of interest paid during the course of the loan, year in which the loan will be fully repaid and the amount of time the homeowner will have to remain in the home to recoup closing costs associated with re-financing. Homeowners should also determine these values for the current mortgage. This can be very helpful for comparison purposes. Homeowners can compare these results and often the best option is quite clear from these numeric calculations. However, if the analysis does not yield a clear cut answer, the homeowner may have to evaluate secondary characteristics to make the best possible decision.
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10 Responses to “Are you Considering Refinancing?”
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Wow, you need to re-post this with a big I told you so at the top. I bet there are many pre-foreclosures out there who signed that horrible loan right about the time you posted this
I agree 100% with consulting with an “expert” when it comes to refinancing. People pay for expert advice with investments, health, and many other things but then thay want to save a few dollars when it comes to going to qualified mortagge planners.
How to you feel about refinancing now? Should we start looking now or wait until we see where this economic crisis takes us?
Fortunately for me, I’m avoiding the financing conundrum altogether and paying cash. Cash is king, and it’s going to allow me to negotiate a lower purchase price for the condo I’m looking at.
Refinancing is ok if the equity on your home is in your favour… otherwise the bank has you by the balls!!!
nice ‘balanced’ post — especially considering when you wrote it.
I’m wondering if the state(s) you live or work out of are ‘recourse’ or ‘non-recourse’.
Reason i ask, there was quite a bit of noise on the real estate blogs as things were rolling over that a lot of people had inadvertently gotten themselves into a ‘recourse’ loan (home equity line) in place of a primary ‘non-recourse’ loan.
Of course, people weren’t taking out helocs expecting such a dramatic downturn i’m guessing but this would seem like another instance where ‘doing nothing’ would be advantageous — where the law treats the two loan types differently in cases of default.
I agree 100% with consulting with an “expert” when it comes to refinancing. People pay for expert advice with investments, health, and many other things but then thay want to save a few dollars when it comes to going to qualified mortagge planners.
Good article.Oh also, loving your blog design. I used to have a similar blog to yours before I sold it on at the beginning of last year….
Thank you very much, enjoy blogging.
I would just go to consultation with an expert. I had a limited knowledge on this and am so confused on the said rules. It would be comforting to just refer to someone with some experience.