Over the last 7 years, the conditions for refinancing your Louisville, KY home have been the best in industry history. Interest rates continue to be at historic lows and underwriting guidelines continue to change making refinancing an excellent option. Because of the continued changes, it is always a good idea to regularly evaluate your mortgage and financial situation with an expert who is up-to-date on the current underwriting guidelines with all mortgage types.
Lately, FHA loans in particular have become very popular for refinancing. The loan size allowed in Louisville has risen to $302,500 allowing more homeowners to qualify. Guidelines have become more favorable allowing many that currently have credit problems and sub-prime mortgages to obtain the best fixed rates available. These changes also make home ownership that once seemed out of reach a real possibility for some who are looking to buy a home for the first time.
If you are considering refinancing your current mortgage you have to look at several factors. What is your total financial situation now and what will it be after the refinance? The following factors should all be an equal part of your decision to refinance:
- The interest rate, both the current rate and your present mortgage rate
- The total balance owed before and after refinancing
- Time (How long you intend to stay in the property and the new loan.)
- Risk (Is it fixed or adjustable? Is it interest only? Is there a penalty to pay it off early?)
- What are the tax implications associated with your refinance?
- The new monthly payment
- All closing costs
- Is the loan officer an expert, reputable, and trustworthy?
- Do you completely understand every aspect of the refinance?
If all of these variables are favorable to you, then the time to refinance is now. The best way to get into trouble, however, is only focusing in on just one or two of the variables. For example, it sounds great to get a zero closing cost loan, but that is negated if the interest rate is 1% higher as a result. It may sound wise to pay $4000 in costs to lower your rate from 8% to 6% if you owe $400,000. That is $8000 in savings in just year one. What if you only owe $50,000? Does that still make sense? It would take at least 4 years to break even. Will you still have this loan in 4 years?
What if someone says ‘no thanks’ to refinancing just because the payment is only $10 a month lower, but what they didn’t think about is they can get also get a $5000 tax deduction? What about someone that has a $300,000 interest-only loan at 7% versus someone who has a typical $300,000 fully amortized loan also at 7%? Three years later the interest-only person is still paying 7% on $300,000 which is actually more overall interest even though the rate remained the same.
As you can tell, there is a lot to know and understand. I am a Louisville based mortgage expert that has helped thousands of local residents with their mortgage and personal finances. I offer a 100% free mortgage consultation for all local residents. Contact me anytime and we can discuss your particular circumstances, then match that up with the current market guidelines to see if refinancing will help you.
Mike Roberts
502-244-4700 x 117
mike_roberts@tmwrates.com
www.billsexpert.com
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