Considering Re-Financing?
By Bob Schwartz, CRS,
GRI ©2005
www.brokerforyou.com All rights reserved.
Homeowners who are considering re-financing their home
may have an abundance of options available to them.
However, these same homeowners may find themselves
feeling overwhelmed by this wealth of choices. This
process doesn’t have to be so frustrating though.
Homeowners can greatly aid themselves in the process by
taking a few simple steps. First the homeowner should
decide on his refinancing goals. Next the homeowner
should confer with with a re-financing expert and
finally the homeowner should understand that
re-financing is not always the best solution.
Establish Your Goals for Re-Financing
The opening step in any re-financing process should be
for the homeowner to establish his goals and also decide
why he is thinking about re-financing. There are many
different answers to this question and none of them are
necessarily right or wrong. The most important thing is
that the homeowner is making a selection that will drive
them towards their financial goals. Even though there
are no right or wrong answers as to why re-financing is
the right choice there are, however, certain reasons for
re-financing which are very common. These reasons
include:
* Reducing monthly mortgage payments
* Consolidating current debts
* Reducing the amount of interest
paid over the course of the loan
* Repaying the loan quicker
* Gaining equity quicker
You may find their mortgage re-financing plan fits into
one of the above goals or there may be a very 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 the goals of the
homeowner are not known.
Talk with a Re-Financing Expert
Once a homeowner has figured out why they want to
re-finance, the homeowner should think about meeting
with a re-financing expert to figure out 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
learned in the area of re-financing might consider
ignoring the option of consulting with a re-financing
expert. However, this is not recommended because even
the most learned homeowner may not be aware of the
newest re-financing options being offered by lenders.
While not comprehending all the options may not seem
like a big deal, it can have a large impact. Homeowners
may not even be aware of mistakes they are making until
they hear of friends who re-financed under similar
conditions and received more beneficial terms. Hearing
these scenarios can be quite discouraging for some
homeowners especially if they could have saved
considerably more while re-financing.
Think About 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 every re-financing option looked at, the homeowner
should determine the estimated monthly payment, amount
of interest paid during the course of the loan, when
exactly 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 their
current mortgage as it can be very helpful for
comparison purposes. Homeowners can compare these
results and often the best choice is very clear from
these numeric calculations. However, if the analysis
does not yield an obvious answer, the homeowner may have
to evaluate secondary characteristics to make the best
possible decision.
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
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