REFINANCE MORTGAGE LOANS 

Currently, many people have Interest Only ARM's (Adjustable Rate Mortgages), that are maturing, requiring a refinance.

There are several mortgage programs to choose from when it comes to refinancing, but most importantly, there are several factors to consider When considering a home mortgage refinance:

1. How long will you live in the property?   If you are not going to be in the property for the long haul, perhaps another short term ARM will serve you fine.  If you are unsure, I would always opt for a longer term ARM or a fixed rate.  Historically, people stay in a home longer than they expect, and I have seen this to be the case with many of my clients as well.

2. What is your current interest rate? If your current interest rate is higher that the current fixed rate, then it makes sense (in most cases) to refinance for a lower rate.  You still need to assess how long you plan on being at the property because if you save $100 per month for 8 months, and it costs you $1,600 to refinance, that is not a wise financial move.

3. How much equity do you have in your property? If your loan to value (LTV) is greater than 80% (meaning that your outstanding balance is greater than 80% of the estimated value of your home), then you will either have to pay mortgage insurance or have a second mortgage to keep the first mortgage below 80% LTV.   The good news is that as of January 2007, private mortgage insurance (PMI) which was normally not tax deductible, will be deductible under many circumstances.

4. To pay points or not to pay points.   In general, you should be able to obtain a mortgage without paying points.  I know many brokers don't like to hear people say this, but the bottom line is that unless you have some challenging circumstances, you should not have to pay points; unless you are "buying the rate down".  Specifically, I would not pay any Origination Fees, which is generally a point (1% of the loan amount) and is often pure profit.

If you are going to be in your home for the long haul, and you are getting a fixed rate mortgage, paying points to buy the rate down can make sense.  In general, a point (1%), will buy your rate down (or reduce your rate) by .25%.

5. Your current debt load.   Taking cash out of your home to pay off debts, can provide a tremendous relief, while making those payments tax deductible.  You need to check with your accountant to determine to what extent however as everyone's situation varies.

6. Cash Out Refinance vs. Second Mortgage.   Sometimes rather than taking out a new loan and paying off your existing mortgage, a second mortgage or home equity loan, may be a better option. If this is a consideration for you, call me and we can look at the numbers for both options and see which is better.

If you need to speak with a mortgage advisor to assist you with the financial management of your largest asset (your home), contact us at 800-757-9704 or info[at]atozlender.com.  If you are ready to apply for a home mortgage, you can fill out our online mortgage application and one of our mortgage advisors will contact you directly.