Despite the ugly finance and loan difficulties over the past few years, there are a lot of loan programs being pushed right now by lenders. Current rates continue to linger at the amazing low rates hovering in the low 5 percent range. However, many financial experts are predicting that rates will increase during this year.
There are still a number of folks with adjustable rate, interest only or negative amortization mortgages. This is another reason for lenders to encourage homeowners to make a refinance move. However, due to the loss of equity, many people will find it difficult to get out of the current mortgage by refinancing. But there are many reasons to give serious consideration for such a move if it is possible to make it happen.
However, homeowners should pause just a bit and remember some basic elements for evaluating a refinance. It used to be that in order for it to be worthwhile, a homeowner should see about a 2 point reduction in interest rate below the current rate. But as low as rates have been the past few years, unless it is a matter of converting from an ARM to a Fixed rate, it may be hard to see a rate two percent lower than currently experienced and have it be a smart move.
When a new loan is proposed, one should always look at the Good Faith Estimate and review the numbers. It is not only a matter of finding a lower rate and seeing a lower monthly payment, but what about the costs to make the refinance happen. One needs to look at the out- of-pocket costs or up-front fees that will be charged. Then do some number crunching and determine how long it will take to re-coup the closing costs in comparison with the savings from the monthly payments.
Refinancing may be a great thing to do. But make sure it makes sense in dollars and cents. Otherwise, if one is in a reasonably low fixed rate loan, it may be best to remain in the present loan and make additional principle payments, including the money that would have been used to make the refinance.
St. George REALTOR® Jim Coleman is Associate Broker and Partner/Owner of ERA Brokers Consolidated. He Specializes in Residential, Investment and Commercial Real Estate, holding National Designations of Accredited Buyers Representative (ABR), Certified Residential Specialist (CRS), Resort and Second Home Property Specialist (RSPS), Seniors Real Estate Specialist (SRES), Certified International Property Specialist (CIPS), GREEN Property Specialist, and Certified Short Sale and Foreclosure Resource Specialist (SFR). You can contact him by e-mail at Jim@JimColeman4Homes.com. Call: (435) 627-5411; or write: Jim Coleman, 201 East St. George Boulevard, St. George, Utah 84770. This and other columns are available at www.WinningTalk.com/articles.