Mortgage Refinance

A mortgage refinance is exchanging your current home mortgage loan for a new one. Essentially, you reapply for the loan, filling out forms like you did during the original application process. The main objective is to determine how and if a refinance is beneficial to what you see in your financial forecast.

The Decision

Several resons to refinance

• When lower interest rates are offered to decrease the monthly payment
• Exchanging an adjustable-rate loan for a fixed rate loan so the rate stays the same throughout the life of the loan
• Shortening the length of the loan to save you thousands in interest costs
• Shortening the length of the loan allowing you to pay off your mortgage faster and speed up the amount of equity in your home
• To borrow some extra cash to pay off debts or use for other expenditures

If one of these options meets your future financial planning needs, refinancing will be the right decision. Which one is right for you? There are two main options:

1. Rate-Term Refinance
2. Cash-Out Refinance

Rate-Term Refinance
Borrowers who opt for a rate-term refinance receive enough to pay off the current mortgage, usually to take advantage of a lower and/or fixed interest rate or change the length of the loan. If outside debt is minimal and/or manageable, the rate-term option is possibly the better choice.

Cash-Out Refinance
Borrowers who opt for a cash-out refinance also pay off the existing loan but receive additional funds at closing by using some of what has built up in the equity (the value of your home minus what you owe equals the equity amount).

When to consider a refinance Consider a mortgage refinance when interest rates are ½% to ?% lower than what your rates are at now and if it is more affordable.

Other factors, besides lower interest rates, to consider before refinancing:

• Planning to stay in the home for awhile
• Will the equity help fund later home improvements, college tuitions or weddings?
• Will it accomplish short term as well as long term goals?

It’s Good to Have Good Debt
Borrowing money against an appreciating asset, like a home, is good debt. If you pay down or pay off a credit card at 19% interest with the cash back from the mortgage refinance, that is good debt. High interest credit cards are considered bad debt especially if you can not pay off the balance in full every month. If you have debt, focus on having the good debt.

Disclaimer:   Debt Consolidation Deals, Inc. does not provide legal, investment or Tax advice. If a client needs legal services or legal expertise, they must seek the advice of a licensed attorney. Individual program results may vary.