Now’s a good time to consider refinancing your home

The Mortgage Professors

For many this is a great time to refinance their homes.  In that last three weeks rates have been the lowest we’ve seen in the last 25-years.

Here are a few ways those low rates can help:

  1. Lower your payment. Be prepared by having a low monthly out lay.
  2. Lower your term. With rates this low, you may be able to shave years off of your mortgage term and save thousands.
  3. Take cash out. There are several ways to use the equity in your home to your advantage:
  • Pay off higher rate and/or unsecured debt
  • Save for children’s college education
  • Purchase investments while the market is low.

If you are refinancing to lower your rate and/or term these simple equations will help you determine if refinancing your loan makes financial sense.

The Beak Even Point, is the number of months it takes to recoup your costs.  The formula is:

BE = Costs / Monthly Savings

The Total Savings, which is the amount of savings you will achieve INCLUDING paying the costs of refinancing.  The formula is:

TS = Total Payments Remaining on Current Loan – Total Payments on New Loan.

Keeping in mind that it IS harder for Self-Employed borrowers to get a home loan.  Lenders are weary to lend to those without a steady paycheck, no matter how good your living may be.  Here are a few good tips:

  1. Start Now:  Don’t wait until the last minute to reach out to a Loan Officer.  Call now and start the dialogue with your loan officer.
  2. Bring your documentation: Lenders have very complicated ways of calculating income for self-employed borrowers.  Find and bring your last two years of income documentation (1040’s, W-2’s, 1099’s etc).
  3. Maximize your credit scores: Your credit history is still the number 1 factor in underwriting.  Check your scores and focus on getting them as high as possible.
  4. Consider a larger down payment: The more you put down on your home the less lenders are concerned about your credit scores and Debt-to-Income Ratios.

 

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