The refinance bus has not left the station, but you may not want to waste anymore time.

As of this writing mortgage rates are still at historic lows, due to the slower than desired recovery in the global economy. I am not going to get into the political discussion as to reasons why, I just want to talk about having you take advantage of them.

However, since the housing market is picking up, home values in many markets is on the rise, so if refinancing even a year ago didn’t make sense, it may be a good idea now. If after reading this post you want to take a look at real numbers, contact me and we’ll see if it makes sense for you.

Why am I refinancing?

Are you looking to do a home improvement project and want to take money out of the house (called a Home Equity loan)? I am not a fan of these unless there is no other alternative. In the State of Texas only borrowers are restricted to borrow up to 80% of the appraised value of the home. These loans are more expensive on the rate, and there are other restrictions later as well. There are other programs that we can look at to do the construction and refinance the whole house at the higher finished value. However, if a Texas Home Equity loan is the best way to go, that’s what we’ll do.

Sometimes people need to refinance their mortgage due to a divorce, in order to inherit a property, or to change an ownership interest in a home for other reasons. The most common reason is to do a rate and term refinance, in which the borrower is looking to get a better interest rate on their home loan. I will show you how you can make some real money by only saving 1% on your refinanced mortgage.

How long will I be in the home?

What is the long term plan for living in your current house? Are you about to start a family and need a bigger house in a few years? Are you going to be an empty-nester soon and think you may want to downsize, or go from a single-family home to a condominium or townhouse? Any kind of changes like this should come into play to make that judgment about the cost benefit of lowering your payment. However, if you are sure that this will probably be the last house you’ll have a mortgage on, maybe locking in a low rate and saving some money per month may be a good idea, even if it takes longer than 36 months to recover the cost of the home loan. I can show you amortization tables and see real numbers for your situation.

I want to save a bunch of interest by doing a 15-year loan.

That’s a valid plan. However, you may want to consider the liquidity of staying with a 30-year mortgage. Especially if you are disciplined enough to make an extra payment once or twice a year, or put some extra money every month toward your mortgage after you have paid off other debt such as credit cards, car loans or other revolving debt because the interest rate on these loans will usually be higher that your mortgage rate, and this interest is not tax deductible, while mortgage interest can be deducted. That being said I am not a CPA; you should consult with one regarding any tax laws.

If you look at the example below, there are ways to make your money work harder for you. In the next post we will take a look at the interest saved at the new rate.

John Lyng is a Mortgage Loan Officer with Supreme Lending. He is experienced with traditional bank programs, as well as alternative programs to help people get into their home. John has a varied background in working with mortgage banks and non-profits, and believes in guiding families to prepare for affordable homeownership.

If you have questions about this or any mortgage-related topic, please contact John Lyng directly at 214-862-3579, or send an email to John.Lyng@SupremeLending.com.