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Copyright © 2006 by
Bob Schwartz
San Diego
real estate broker
Certified
Residential Specialist
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Are
You Contemplating Re-Financing?
By Bob Schwartz, CRS, GRI, San Diego real estate broker
Homeowners who are contemplating re-financing their home may have a great amount
of options open to them. However, these same homeowners may find themselves
feeling overwhelmed by this abundance of choices. This process doesn’t have to
be so tough though. Homeowners can greatly aid themselves in the process by
taking a few basic steps. First the homeowner should decide on his refinancing
goals. Next the homeowner should talk to with a re-financing expert and finally
the homeowner should know that re-financing is not always the best resolution.
Conclude Your Goals for Re-Financing
The initial step in any re-financing process should be for the homeowner to
figure out his goals and also decide why he is considering re-financing. There
are various different answers to this question and none of them are positively
right or wrong. The most vital thing is that the homeowner is making a decision
that will move them towards their financial goals. While there are no right or
wrong answers as to why re-financing is the right decision there are, however, a
few reasons for re-financing which are very common. These reasons include:
* Reducing monthly mortgage payments
*
Consolidating existing debts
* Lessening
the amount of interest paid over the course of the loan
* Paying
off the loan quicker
* Gaining
equity quicker
You may find their mortgage re-financing technique fits into one of the above
goals or there may be a very different reason for wanting to re-finance. The
reason for wanting to re-finance is not as important as determining this reason.
This is because a homeowner, or even a financial advisor, will have a difficult
time figuring out the best re-financing option for a homeowner if the goals of
the homeowner are not known.
Speak with a Re-Financing Expert
Once a homeowner has decided on why they want to re-finance, the homeowner
should think about meeting with a re-financing expert to figure out the best
refinancing strategy. This will likely be a strategy which is financially sound
but is also still geared to meeting the needs of the homeowner.
Homeowners who feel as though they are particularly well learned in the area of
re-financing might consider skipping the option of consulting with a
re-financing expert. However, this is not recommended because even the most
learned homeowner may not be aware of the newest re-financing options being
offered by lenders.
While not comprehending all the options may not seem too bad, it can have a
significant impact. Homeowners may not even be aware of mistakes they are making
until they hear of friends who re-financed under similar conditions and received
more beneficial terms. Hearing these scenarios can be quite off-putting for some
homeowners especially if they could have saved considerably more while
re-financing.
Contemplate Not Re-Financing as a Possible Option
Homeowners who are considering re-financing may realize the significance of
evaluating numerous different re-financing options to determine which option is
best but these same homeowners may not realize they should also thoroughly
consider not re-financing as an option. This is often referred to as the “do
nothing” option because it refers to the conditions which will exist if the
homeowner does not make a change in their mortgage situation.
For each re-financing option looked at, the homeowner should figure out the
estimated monthly payment, amount of interest paid during the course of the
loan, when exactly the loan will be fully repaid, and the amount of time the
homeowner will have to remain in the home to recoup closing costs associated
with re-financing. Homeowners should also calculate these values for their
current mortgage as it can be very helpful for comparison purposes. Homeowners
can compare these results and often the best option is very clear from these
numeric calculations. However, if the analysis does not yield a clear cut
answer, the homeowner may have to assess secondary characteristics to make the
best possible decision.
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