Korene's Blog

To Refi Or Not To Refi

For years we have all read that you should not refinance until rates drop two percent. This is a horrible rule of thumb. You will want to wipe it from your mind. For most of us, our homes will be the largest investment we will make in our lives, so do not use a rule of thumb. But DO NOT be lazy in your research or planning, either. Many people act like going through the loan process is on the same list as going to the dentist or breaking in a new pair of shoes on a 30 mile hike. When you think about how much time you actually spend gathering paperwork and signing documents, you are probably looking at less than three hours of your time. Those three hours can provide you with a return you will not get in your checking or savings accounts or a CD or in the recent stock market. Contact me, as your most trusted mortgage advisor and let's discuss your specific situation with your goals, plans, desires, and wishes.  As a good lender, I will provide a cost study for you and the numbers that will let you know what move you may want to take and what should be the costs and results thus allowing you to make a responsible, informed, and profitable decision. You will believe in the numbers and not a rule of thumb.

I had a conversation with someone recently that provides an example of how casual most people are when it comes to their largest investment. I asked him when he last refinanced his home. He told me it was four years ago. I responded by saying "Rates are much lower now. Let's talk about refinancing you." He responded by telling me he was not interested because he only has 26 years left and did not want to start at 30 again. A reasonable assumption, but you know what they say about making assumptions. He never took the time to speak with a financial or mortgage advisor. This is what I knew about his situation:

1) His goal was to pay off his mortgage in 26 years;

2) He could afford his current payment;

3) His current interest rate was 5.875%;

4) His balance 4 years ago was $324,000

5) He could document his income

6) He would have a low debt to income ratio

7) He has good credit.

So let's assume (sorry, I have to assume) a no lender fee 30 yr refinance at 4.5% with 3rd party fees of $2,000 and that he will remain in his property for 30 years. What would the numbers be?

His current balance is $306,175. He will make payments of $1,917 until 2036. His remaining payments will total $597,975.

The starting balance for the new loan would be $308,175. His payment would be $1,561. His mortgage will end in 2040. His total payments will be $561,960.

Just investing $2,000 and a couple of hours will save him $36,015.

But Wait...

Remember, he told me he was comfortable with his current payment. WHAT IF he refinanced at 4.5% but he continued making payments of $1,917?

Calculating.

He will pay off his mortgage in 2030 -that's 6 years sooner than his original goal. His total payments will be $466,037. Now just investing $2,000 and a couple of hours will save him $131,938.

Please contact me, your trusted personal mortgage banker to find out if a refinance will benefit you.  I will be happy to discuss your situation and see if a refinance can benefit you or if you are better served with some other type of loan program or if you should stay in your current program.

Best Regards, Korene L Clopine-Seaman

Direct Office  Phone: 623-340-0934 Fax: 623-218-1807
e-Mail:korene@afrhomeloans.com or korene@klcsloanteam.com

Website: www.klcsloanteam.com 

Alliance Financial Resources, LLC
2155 West Pinnacle Peak Road, Suite 201
Phoenix, AZ  85027
Phone: (602) 772-3147
Fax: (623) 218-1807

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Copyright © 2010 Korene Clopine-Seaman
Branch Manager of the soon to be open branch in Sun City, AZ
~FHA, VA, Reverse Mortgage, Jumbo Specialist~
Phoenix, AZ 85027
(623) 340-0934 All Rights Reserved.

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