When to Refinance Home Loans | Irvine Real Estate | Irvine Homes for Sale

by Robert Mack on January 21, 2011

in Latest News, Sellers

It is all the rage right now to refinance home loans.  For millions of Americans, the ability to refinance their first or second mortgage has meant the ability to keep up with their payments and avoid foreclosure.  For others, the decision to get my home loan refinanced means cashing in on interest rates at their record lows.

How do you know if you should jump on the band wagon and refinance your home?

Are you moving soon?

If you are thinking about refinancing your home loan, one of the first questions you need to ask yourself is how long you are planning to be in your current home. In most cases, if you are planning a move within 3-5 years from the time your loan would close, it is better to stick with your current loan.

This is because the closing costs take about 3-5 years to recoup.

Are you nearing a balloon payment?

Does your current loan call for a balloon payment? Is the balloon payment looming near, and you don’t have the money to cover it? If that is the case, you should probably be looking at your home loan refinance options.

Do you need to lower your interest rate?

Interest rate is not the only factor which creates a good or a bad loan, but it is a major component.  Does the new loan enable you to lower your interest rate?  Unless you see a net drop of .5%, then you should either skip the refi or find a better deal.

Is your current loan a fixed rate loan?

If your current loan is an adjustable rate mortgage which is set to increase, you should schedule a face-to-face with a mortgage broker as soon as you can.  These adjustable rate loans are the main cause of the skyrocketing foreclosure rates our economy has been enjoying these last several years.

An adjustable rate loan in and of itself does not mean you need to refinance your home loan, but it does mean you need to sit down and figure out just how much the adjustments will affect your ability to keep pace with the payments.

Does the new loan lower your payment?

It would be a real bummer to go through the cost and hassle of a refinance home loans process just to find out the net change to your mortgage is negligible or worse – an increase!  Make certain of your numbers before you sign.

What does the refinance mortgage calculator say?

If these answers seem to place your mind into more of a fog, consult a home loan refinance calculator. Crunching the numbers in real time can clear out the fog in a hurry.

What are your reasons to refinance?

When contemplating refinancing your home or second mortgage, ask yourself why you want to do it?  Do you want to restructure the debt to pay it off more quickly or lower the payment by spacing the loan out over a longer period of time?  Do you want to lower your interest rate? Do you need to lower your monthly mortgage payment? Do you need to consolidate debt?  Do you want to increase the debt load on your home?

If the refinance loan package you are looking at does not accomplish each of your goals in the refinance, don’t do it.  Find a loan that gets you what you need in every aspect of your list.

Where are you in your current loan?

If you are nearing the end of your payoff cycle in your first or second mortgage, it is not usually the best financial decision to refinance the loan.  There are exceptions, like financial hardships which make it difficult to keep up with the bills, but generally it is best to keep the same mortgage when its time is short.

Will the new loan significantly increase your debt load?

Debt consolidation may look good on paper, but in practice it is not always the best choice.   If you are having difficulty making credit card payments, hitching them to your home might mean you end up heading to foreclosure — all because of that shopping spree in the summer of ’09.  Better to let the credit card companies destroy your credit report than to lose your home over it.

I get this question all the time! Check out this article to learn when the right time to refi would be for you!

Posted on Irvine Orange County Real Estate Market News

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Post by Robert Mack

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