Should I Refinance Now?
There are multiple reasons why a homeowner would want to refinance their home. As a general rule, it makes sense to refinance your home when you will realize a savings. This means that the amount of money that you save as a result of a lower interest rate, exceeds the costs involved with the refinance itself. If you plan on remaining in your home for a short period of time, then it may not make sense to refinance due to the short period for savings.
Should I consolidate other debt into my refinance loan?
If the interest rate is lower on the refinance loan then it may make sense to consolidate debt. The issue at this point would be to determine how much equity you have in the property. Most lenders will allow you to refinance a loan amount up to 75% of the appraised value. Although, there are lenders that will consider going higher. (For example, if your house is worth $100,000 and your current outstanding mortgage is $50,000, then you could consolidate up to $25,000 of other debt to give you a new total loan amount of $75,000). Make sure to include your existing mortgage balance plus any new debt that you are consolidating to determine what the new payment will be.
What type of loan should I refinance to?
When considering what type of loan makes sense for you to refinance, you need to consider how long you will remain in the property, and what interest rate will provide the most savings. Generally, if you plan on living in the home more than 7 years then you may consider fixed rate mortgages, if less than 7 years you might consider adjustable rate mortgages.
When is it time to refinance my A.R.M.?
If the fixed rate period of your ARM is within 1 year of ending and you have not already refinanced, now is the time to look at your options. For example, if you have a 3/1 ARM, (fixed for 3 years then becomes a 1 year adjustable) you need to consider refinancing before the 3rd year is up and the conversion takes place. If current market rates are lower than the rate you have, it may make sense to stay with that program during the change period. You will need to determine exactly what your interest rate will change to in order to make this decision. You can refer to your note, which you should have been provided a copy of, or contact your lender to find out how your rate will change.
Can I take cash-out with my refinance?
Taking "cash-out" when you refinance means receiving money back at closing above and beyond what your original loan amount was. This means that you have just increased your loan amount in order to receive cash.
In a cash-out refinance most lenders will allow the total refinance loan to be no more than 80% of the appraised value. (For example, if your house appraised for $100,000 and you have a $50,000 current mortgage you would be eligible for $30,000 cash-out which would equate to an $80,000 total mortgage. The costs of the refinance would be deducted from the cash-out amount).