Should I Refi???

Questions You Should Answer Before Refinancing

Before interest rates rise you may want to refinance your home to pay off debt, get better terms, or cash out equity for reinvestment elsewhere.  Here are a few questions you should ask yourself before you take out a new loan.

  1. How Long Do You Plan To Stay In The Home?  If you don’t play to own the home for roughly three years or more after refinancing, it might not make financial sense to refinance.  Ask your lender for a break even – breakdown.
  2. Are You Refinancing For A Good Reason?  Taking equity our of your home to pay down credit card debt is risky.  Once the debt is gone away, it is easy to “reload” and run new debt while still paying off the equity line.
  3. What Type Of Loan Do You Currently Have?  One good reason to refinance is to get more favorable terms, such as getting into a low fixed-rate loan from a higher fluctuating rate.
  4. Should You Reinvest The Money?  Cash-out refinances are cheap compared with other loans, so you may be tempted to invest the money in another home, and rent out your current home.  Or you may want to remodel to keep you home’s value high in the marketplace or to improve its utility.  All investments carry risk, so before you decide, ask your lender to help your figure out the risk vs. reward.

Take the monthly saving amount and divide it into your total closing costs.  This figure represents the number of months it will take to pay back your closing costs.

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Why 20% of Households Are Throwing Away $11,500

 Why 20% of Households Are Throwing Away $11,500

About 20 percent of households who would benefit from refinancing are not doing it — and they could be losing out on lessening their mortgage payments by thousands of dollars over the life of the loan, according to a new report from the National Bureau of Economic Research.

In analyzing a large random sample of outstanding mortgages from December 2010, researchers found that the median household could save $160 per month over the remaining life of the loan, amounting to a total savings of about $11,500.

“Despite the large stakes, anecdotal evidence suggests that many households may fail to refinance when they otherwise should,” according to the report. “Failing to refinance is puzzling due to the large financial incentives involved.”

The report found that borrowers may fail to refinance because they are unable to calculate the full financial benefit to them, they fail to see the benefits over time, or the high amount of upfront costs may deter them.

“Our results suggest the presence of information barriers regarding the potential benefits and costs of refinancing,” according to the NBER report. “Expanding and developing partnerships with certified housing counseling agencies to offer more targeted and in-depth workshops and counseling surrounding the refinancing decision is a potential direction for policy to alleviate these barriers for the population most in need of financial education.”

 

If you are looking for a reliable lender – let The Caton Team know and we can connect you with the best in the business.

 

Source: “Here’s Why Some Home Owners Throw Away $11,500 a Year on Mortgage Payments,” HousingWire (Sept. 10, 2014)

I read this article at: http://realtormag.realtor.org/daily-news/2014/09/11/why-20-households-are-throwing-away-11500?om_rid=AACmlZ&om_mid=_BUEfE1B88XY4RJ&om_ntype=RMODaily

Remember to follow our Blog at: https://therealestatebeat.wordpress.com/

Got Questions? – The Caton Team is here to help.  

Email Sabrina & Susan at: Info@TheCatonTeam.com

Call us at: 650-568-5522 Office: 650-365-9200

Want Real Estate Info on the Go? Download our FREE Real Estate App:  http://thecatonteam.com/mobileapp

Visit our Website at:   http://thecatonteam.com/

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Thanks for reading – Sabrina

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