• Making the most of your hard earned money is important to you and your family, so wasting it on a payment (or payments) that are too high is just not right! That's why structuring your mortgage payments to the most optimal by refinancing your current home is always something to consider. 

    There are many different avenues of making refinancing work for you:

  • Lowering Your Interest Rate

    Of course, this is the most popular reason for refinancing mortgages. With a lower rate you are obviously paying a lower payment on the same mortgage. An example of how you can dramatically lower your payments is as follows:

  • Loan Balance Interest Rate Payment
    Old Loan $150,000 9.00% $1,197.94
    New Loan $150,000 7.00% $992.16
    Total Savings
    Per Month

    This example assumes a few things. One, that we are comparing apples to apples, in that both are thirty year fixed rate loans. Next, you have owned your home for about four years and have been paying on the loan in a consistent, normal manner. Next, it assumes you will be paying the costs of the loan through the loan.

    As you can see the savings can be substantial. So lowering your rate is always the best thing to do, right? Well, just about all of the time the answer to that question would be yes, however it is worthwhile to look at some of the other parameters involved in the loan. The most important is cost versus savings. In the example above you are saving $208.78 per month. Let's assume this loan is costing you about $3100 in points and fees. What is important is finding where your break even point is in recovering your costs. To do this in our example you do the following:

    $3100 divided by $202.78 = 15.33 months

    Therefore it will take a little over a year to recover your costs in obtaining that lower rate. This refinance is probably a good idea if the owner is going to stay longer than two years or so.

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  • Combining Two Loans Into One

    Combining first and second trust deeds is just about always advantageous to a homeowner. Firstly, the interest rate you may be paying on the second is probably in the double digits (11 to 16 percent!). Secondly, many times seconds have other terms which are not in the borrowers favor, such as: balloon payments, interest only payments, etc. Lastly, having one payment is always easier than two. In addition, first trust deeds usually have longer terms (30 versus 15 years) than seconds.

    Cash From the Equity in Your Home

    The home you own can be a great resource in obtaining the cash you need for any number of reasons:

    1. To pay off bills (credit card debt, auto loans, etc.)
    2. To buy another piece of property
    3. To pay for college costs
    4. To invest...

    Many times this is the best cash you could ever have; firstly, the interest on the loan is usually tax deductable, interest on credit cards and other types of debt is not; secondly, the larger loan will usually not increase your payments very much. 

    Changing From an Adjustable to Fixed Rate Loan

    Many homeowners, when they first got their home, went the route of getting an adjustable rate loan to qualify for the most home that they could afford. In many cases, circumstances have changed; either rates have come down since buying the property or the income of the household has risen. In any event, a change from an adjustable rate loan to a fixed rate is usually advantageous to the homeowner.