VOL. 127 | NO. 230 | Monday, November 26, 2012
Rays of Wisdom
Dana and Ray Brandon
It Might Be Time to Refinance … Again
By Ray and Dana Brandon
Ray’s Take Here’s a surprising fact: the average American homeowner refinances their mortgage every four years.
Right now might be a good time to do just that, even if it feels like you just did it. We have some of the lowest mortgage interest rates of the past 50 years or so. Consider pulling out the calculator to determine how much refinancing your home could save you each month as well as over time.
To determine if refinancing is right for you, look at all the associated costs, like points, fees, appraisals, etc. If you can recover all those costs with the savings you’ll realize from refinancing within 24 months, it might be time for you to refinance.
If you have an adjustable-rate mortgage, you should probably look even harder at refinancing and switching to a fixed-rate mortgage. With mortgage rates as low as they are right now, it’s much easier to imagine them going up than down. Having a fixed rate reduces the risk of your monthly note rising beyond your means.
If you are lucky enough to still have significant equity in your home but you’re carrying a lot of credit card debt, you may even consider taking out a larger loan than you now have – but only if you use the extra cash to eliminate that high and non-tax-deductible credit card debt. Be sure you do a bit of “plastic surgery” right after or you might find yourself back in the same spot in a few years.
When you look at refinancing, consider different loan lengths, too. A 15-year loan will cost a bit more each month but should save you thousands of dollars in interest over the course of the loan.
Finally, take into consideration how much longer you intend to stay in your present home. If you see a move any time in the next four or so years, refinancing might save you a few dollars, but it might not be worth the hassle.
Crunch the numbers and see where you stand. It might be time to refinance – again.
Dana’s Take One thing to think about when you’re considering refinancing is how close you are to retirement age. Heading into retirement with years of mortgage payments still due can really put a strain on the monthly budget. In fact, it could postpone retirement indefinitely. Or, it might force you to downsize considerably, even if the housing market isn’t good or you don’t want to make the move.
Many retirees find that they spend more when they no longer have a job to keep them busy. From longer vacations to health care to treats for the grandkids – it all costs. Not having a mortgage payment could make the difference.
So, think twice before opting for another 30-year mortgage. Do what it takes to pay off your debts and feel years younger!
Ray Brandon is a certified financial planner and CEO of Brandon Financial Planning (www.brandonplanning.com). His wife, Dana, has a bachelor’s degree in finance and is a licensed clinical social worker. Contact Ray Brandon at email@example.com.