PrimeSource REAL ESTATE

Many buyers look to refinance their homes given a wide variety of options to benefit from shifts in the lending markets. As interest rates shift, many home owners and buyers can adjust their monthly payments to lower borrowing costs or consolidate other debts over time. The decision to pursue refinancing should be contingent upon your borrowing costs, financial options and the larger market opportunities. A real estate professional from PrimeSource Real Estate can provide you with insights into the lending market to help you identify better options for financing your property on better terms.

At a base level, there are several important considerations involved in deciding to refinance a property. In particular it may be beneficial to refinance when you have an opportunity to improve your financial situation by lowering monthly mortgage payments, converting from a variable ARM (adjustable rate) mortgage to a more affordable fixed rate option, need opportunities to raise funds to pay for long terms investments such as education and home improvements or want to consolidate your loans by taking some equity in your home. While there are many companies seeking to issue second mortgages or refinancing options to buyers, you should carefully evaluate different options before deciding to move forward in the lending process.  Before accepting one of these offers, however, you’re going to want to evaluate whether they are in your own best interest. Generally, most real estate professionals consider an improvement of at least 2 points in your mortgage rate as a sufficient incentive to pursue refinancing your mortgage, given the costs and time involved with the process. Take full inventory of your opportunities to refinance before moving forward on a decision to restructure your mortgage.

Factors involved in deciding to refinance your mortgage

There are a wide variety of factors involved in the decision to refinance a mortgage, including the upfront fees on the refinancing process. Most lending institutions require an upfront payment in order to restructure your mortgage, meaning you should calculate the break even time in order to bring your mortgage back to equilibrium. Some lenders may be willing to provide better terms on your loan without fully restructuring the mortgage, including temporary drops in the interest rate, the ability to get incentives for purchasing more equity in your home as well as adjusting the time frame on the loan from the original contract. Whether you are seeking improved terms in order to remain in good standing with your lender or to make the borrowing structure more affordable, all borrowers should fully consider the various options and factors involved in the refinancing process. Given that most restructuring often lengthens the financing period before you can obtain full equity in the home, you should consider your long run financial plan in light of the options to take ownership of the home.

You should remain cautious regarding options to take advantage of second mortgages or adjustable-rate terms, which can potentially complicate your credit picture. Keeping with a single, fixed rate mortgage provides an ideal structure from which you can properly budget and evaluate your borrowing options over time. Using the equity in your home as a source of financing should be carefully considered since you want to remain in good standing with your original lender and should aim to increasingly lower the equity ratio of the home over time. There are also tax implications of refinancing to consider to you should fully consult with your tax professional to determine its impact upon your ability to deduct mortgage expenses. Always meet with your primary borrower to discuss the full set of options to restructure your loan properly in advance of making shifts in the borrowing process.