Does It Pay to Re-Finance?
This is a question many homeowners may have when they are considering
re-financing their home. Unfortunately the answer to this question is
a rather complex one and the answer is not always the same. There are
some standard situations where a homeowner might investigate the
possibility of re-financing. These situations include when interest
rates drop, when the homeowner’s credit score improves and when the
homeowner has a significant change in their financial situation. While
a re-finance may not necessarily be warranted in all of these
situations, it is certainly worth at least investigating.
Drops in the Interest Rate
Drops in interest rates often send homeowners rushing to re-finance.
However the homeowner should watchfully consider the rate drop before
making the decision to re-finance. It is important to note that a
homeowner pays closing costs each time they re-finance. These closings
costs may include application fees, origination fees, appraisal fees
and a variety of other costs and may add up quite quickly. Due to this
fee, each homeowner should carefully evaluate their financial
situation to determine whether or not the re-financing will be
worthwhile. In general the closing fees should not exceed the overall
savings and the amount of time the homeowner is required to retain the
property to recoup these costs should not be longer than the homeowner
plans to retain the property.
Credit Score Improvements
When the homeowner’s credit scores get better, considering
re-financing is necessary. Lenders are in the business of making money
and are more likely to offer favorable rates to those with good credit
than they are to offer these rates to those with poor credit. As a
result those with poor credit are likely to be offered terms such as
high interest rates or adjustable rate mortgages. Homeowners who are
dealing with these circumstances may investigate re-financing as their
credit improves. The good thing about credit scores is mistakes and
blemishes are eventually erased from the record. As a result,
homeowners who make an honest effort to repair their credit by making
payments in a timely fashion may find themselves in a position of
improved credit in the future.
When credit scores are higher, lenders are willing to offer lower
interest rates. For this reason homeowners should consider the option
or re-financing when their credit score begins to show marked
improvement. During this process the homeowner can determine whether
or not re-financing under these conditions is worthwhile.
Changed Financial Situations
Homeowners should also consider re-financing when there is a Great
transformation in their financial situation. This may include a large
raise as well as the loss of a job or a change in careers resulting in
a considerable loss of pay. In either case, re-financing may be a
viable solution. Homeowners who are making considerably more money
might consider re-financing to pay off their debts earlier.
Conversely, those who find themselves unable to fulfill their monthly
financial obligations might turn to re-financing as a way of extending
the debt which will lower the monthly payments. This may result in the
homeowner paying more money in the long run because they are
stretching their debt over a longer pay period but it might be
necessary in times of need. In these cases a lower monthly payment may
be worth paying more in the long run.
ABOUT THE AUTHOR
Bob Schwartz, is a Certified Residential
Specialist, CA licensed real estate broker with
www.Brokerforyou.com. Bob
has over 27 years of residential real estate experience, authored a
number of published articles and served as an expert witness for
San Diego lawyers. You can contact
Bob via e-mail at bob@brokerforyou.com or visit his highly popular
San Diego real estate website at:
http://www.brokerforyou.com
------------
This work is protected under copyright and may not be published in
other works without express written permission from
Promotions Unlimited
or the following procedures are implemented: Please feel free to
publish this article (as long as no changes are made (all hyper-links
to remain and not be modified in any way) and the author's name and
site URL's are retained) in your ezine, newsletter, offline
publication or website. A copy would be appreciated at Click
here to email Bob
Back to San Diego downtown real estate article index |
