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Rates have dropped... should I refinance?

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"Should I refinance?" "I heard rates have dropped!" "Can I lower my payment?" Questions like these are heard often as a Mortgage Advisor, especially in times like these when news about historically low interest rates is BIG NEWS, and in conversations near and far. Everywhere we turn, people are benefiting from this amazing opportunity to refinance their homes in order to obtain lower payments, shorten their loan terms, make home improvements, remove, or reduce mortgage insurance – the list of beneficial options goes on.

First of all, a refinance is where you obtain a new mortgage loan that pays off the existing mortgage loan on your home. The decision of whether to refinance your home mortgage is not a simple one just because rates go down, although dropping your interest rate as little as a half to three quarters percent can be a significant savings for you. For example, with a $300,000 mortgage balance, refinancing from 3.75 percent to 3 percent can save a bit over $100 per month. That's over $1,000 a year and almost $20,000 in 15 years!

The refinance process will be much like when you obtained your first loan on your home, with the exception of some streamlined refinance options. Be prepared to provide the lender the required documentation to review (relating to your income, assets and current mortgage expenses), a credit review and incurring costs to third parties such as Title, Escrow, Loan Processors, Notaries, just to name a few. Sometimes an appraisal may also be required depending on the loan program and the amount of equity in your home. All the costs should be taken into consideration and compared to your overall goal in order to determine the benefits of your refinance strategy.

Although a quick internet search may come up with many suggested hard and fast "rules of thumb," as to when to refinance or not, there is no set calculation to use. Simply refinancing to a lower interest rate might not save you money. If you don't plan to remain in the loan long enough to benefit from the cost of the refinance, or it does not help you tackle a more immediate goal, it may not be worth it. Refinancing to a slightly higher rate could save you money when removing things like mortgage insurance, or offsetting other debt and putting that money towards your mortgage payment instead. It depends on the details surrounding your personal situation and should always come with a solid understanding of the cost versus savings.

Do not just rely on a quick internet search, the cold call refinance lead center or the mailbox spam to explore the benefit of a possible refinance – do not miss your chance! Seek the guidance of a Mortgage Advisor who understands how to structure your refinance and is willing to take the time to look at your "big picture."

You can contact Alysha Boles at (661) 858-7214, or visit http://www.advisoralysha.com.