It’s Not Rocket Science
By: Dave Puzniak
Every day, on the TV, on the radio, on the internet, in the mail, on billboards, at your favorite sporting events, and concerts, it’s the same message:
- REFINANCE TODAY!
- RATES ARE LOWEST IN 50 YEARS!
- CALL NOW!
Making the decision to refinance is an important decision and should not be taken lightly. Your home loan is possibly the largest financial investment you will make and you need to analyze your options based on your unique situation to ensure the refinance is right for you. A refinance can take many different forms and your situation dictates the route you need to take in order to improve your financial situation.
The most common refinance is utilized to lower your interest rate and your monthly house payment. This is called a rate and term refinance. The ability to lower your rate will be dependent upon several factors: on the interest rate market improving since the last time you either purchased or refinanced your home; having your credit improve, or seeing your property value rise. A lower interest rate may also allow you to build equity in your house quicker, by increasing the amount of your payment going to reducing the principal balance.
A second type of refinance is decreasing the term of your mortgage. A shorter term mortgage amortization, such as a 20 year or a 15-year term mortgage, generally has lower interest rates. The trade-off is a potentially higher monthly mortgage payment. However, there is the added benefit of a larger amount of the payment dedicated to the paying down the principal balance of your mortgage. The greatest benefit is the ability to pay off your loan sooner, reducing your total interest costs over the life of the loan.
Other reasons to refinance are to change the type of loan program. With the large variety of mortgage programs available such as FHA, VA, USDA, in addition, to grant programs, you may have a program which helped you as a first time homebuyer, but as you build equity may not be as beneficial 5-10 years into the mortgage loan. In some cases, you may start with an adjustable rate mortgage (ARM) to take advantage of a lower introductory rate then change to a fixed-rate mortgage in an effort to stabilize your payments for the remainder of your time in the home. The situation can work in reverse as well. If you know you are going to move within a 5-7 year period then you may look to the ARM in lieu of a fixed rate mortgage to take advantage of the lower rates on the ARM loans.
The final option is using your home as an asset. You may want to remove some of the equity from the house to handle other financial obligations. This is called a cash-out refinance. If you are short on cash but flush with equity in your home, then cashing out the equity in your home can provide you with some options to handle other financial situations within your family.
The uses for the equity can include:
1- Renovations or Repairs– allows you to make improvements to your property or help in the maintenance, put on an addition, redo a kitchen or bathroom
2- Family Budgets – allows you to pay off bills which may have accumulated and lower your overall monthly outlay
3- Tuition Cost – allows you to help pay schooling costs, may be cheaper than student loans and could potentially be tax deductible
4- Debt Consolidation – provides relief to high interest, variable rate credit card debt by turning these payments into a fixed rate manageable payment and restore your household budget
5- Weddings – can help to handle the cost of a wedding
6- Judgments, collections or liens – provides relief for these premium debts from medical issues, lawsuits, and other legal issues
No matter the decision you choose to make regarding refinancing, it is recommended you use a qualified mortgage professional to assist you with your decision. You will want to share your financial goals with your mortgage professional in order to provide them with the information necessary to properly advise you to meet your financial goals.
Licensed mortgage professionals at First Integrity Mortgage Services use their experience, expertise, and the special programs available to discover your goals, present multiple relevant options, and recommend the program that best meets YOUR needs!
Contact David Puzniak NMLS # 559106 to schedule an appointment today at 314-486-2652 or dpuzniak@firstintegrity.com to start the process of refinancing your home!
First Integrity Mortgage Services is a locally owned mortgage banker located at:
77 West Port Plaza, Suite 200
St. Louis, MO 63146, NMSL#276593.
Visit us today at www.firstintegrity.com and see the difference!!
WE THINK. WE CARE. WE DELIVER.