When Does a Refinance NOT Make Sense?

You may have heard about the effect of the recent “Brexit” vote in Europe on the financial markets.  Many investors are temporarily fleeing riskier assets like stocks in favor of more conservative investments like mortgage bonds.  This has driven mortgage rates to their most competitive level in quite some time.  Many economists are estimating that one-third to one-half of homeowners could benefit from a refinance this wrefi-tottereek in light of the sudden improvement in mortgage pricing.

However, if you are considering a refinance, don’t go into it blindly.  Mortgage strategies can be complicated and choosing to refinance haphazardly can have a profound effect on your future cash flow and home equity.

 

Things to keep in mind when considering refinancing:

  • Lowering your monthly payment isn’t everything. Refinancing also resets your amortization schedule which could lead to a loss in equity down the road if you choose the wrong loan program or strategy.  If you have ever seen an amortization schedule, you’ll remember that the interest paid to the bank is heavily “front loaded” in the first years of the loan.  So in general, the longer you have had your mortgage, the less beneficial it will be to refinance unless you can refinance into a shorter term.
  • In my opinion, the best reasons to refinance are…
  1. to free up cash to invest in something more important to you or with a higher rate of return or to help cope with a tight household budget or
  2. to change to a loan program that will enable you to pay off your mortgage faster or with less interest expense.

 I hope you’ll call on me to talk through whether refinancing is a good option for you right now – 858.216.2368

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