SAHBA Home Hints
February 15, 2009
Refinancing How To Tips
There are several reasons why homeowners choose to refinance their home: to lower interest rates or payments, to shorten or lengthen the loan maturity, or to increase or reduce the loan amount. However, with all of the options available, it can turn into a stressful process.
Follow these tips to ease the anxiety of refinancing.
When considering refinancing, homeowners should be sure that the long-term savings will outweigh the initial expenses.
“While refinancing might be a good idea for some, it may not be worth it to others,” said John Strobeck of Bright Future Business Consultants.
Homeowners shouldn't select a new mortgage based only on its annual percentage rate. Instead, they should see how long it will take for the savings to break even with the cost of refinancing.
To calculate the break-even point, homeowners can divide the cost of refinancing by the monthly savings. The resulting figure represents the number of months they will need to stay in the home to make the strategy work.
Also, it is important to evaluate the terms of the loan, whether the interest rate is fixed or variable, and the relative merits of paying up-front fees in exchange for a lower rate.
While refinancing, homeowners should keep their current lender in mind. The current lender already will have their financial information on hand reducing the time and resources they need for processing an application. Keeping the same lender might make it easier and cheaper to refinance than other lenders would.
“In order to get the best deal when refinancing, homeowners should be sure to shop around, crunch some numbers, and ask a lot of questions,” Strobeck, a SAHBA member, said.
In the end, if homeowners decide that refinancing is not the best option, they should ask their current lender if a modification of their current loan is an option. By doing that, they might be able to obtain some or even all of the new terms and apply them to their current loan.
“Lastly, homeowners should be sure to read the entire contract before signing it,” Strobeck said. “They shouldn't let anyone pressure or rush them into making a hasty decision.”
Details: Strobeck at 751-0676.
SAHBA represents about 720 member businesses serving the residential construction industry in Pima and Cochise counties.
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