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Money Matters :  Buying a Home

The first rule is that there are no rules. You should refinance if it makes sense for you, period. The time-worn notion that you should refinance only if you can lower your rate by 2% is meaningless.

I regularly see at least 5 situations that call for refinancing:

1. If you have a fixed rate loan and can refinance at "no cost" into a similar term loan at a lower rate, you should refinance. From my perspective: if I can wave my hands at your 30 year fixed rate mortgage and leave the balance where it is and lower the interest rate then you are foolish not to do it.
   
   Some people say: "Yes, but I have been paying on my 30 year loan for 4 years and you want to replace it with another 30 year loan. This is going to cost me more in the long run". This is not correct. You can, in this situation, still pay the loan off in the same 26 years and be making a lower payment on your new loan than your old one. We will calculate the payment necessary to pay it off in 26 years.
   
   
2. You have an Adjustable Rate Mortgage that is about to increase in rate but you are not pleased with where fixed rate mortgages are. You should look at a "no cost" 1 year Treasury ARM and see if you can keep that same index and margin and "roll back" the rate for a year. This is a "no risk' proposition which in essence this gives you a break for exactly 1 year. During this time you should stay in touch with your broker to decide what to do during that year. I do this for a large number of my customers. Using the WWW and RateWatch they can keep themselves informed. I also regularly update my customers who have ARM's.
   
   
3. You have an ARM and your nerves can't take it any more. You simply want the certainty of a fixed rate loan. Here the key is to recognize that fixed rates are "bouncy" and you want to lock your rate at appropriate time. This is 50% skill, 50% luck.
   
   
4. You have a "balloon loan" that needs to be refinanced. Here, you need to discuss your situation with us. You may want fixed. You may want adjustable. The correct choice of loan depends on the market and most importantly, on your situation.
   
   
5. You need "cash-out". You may want an equity second or a new first. This depends on the relative size of your first and the cash out. Equity lines issued by direct lenders have low cost but high rate. You again have to discuss your exact situation with us.

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