Tuesday, February 05, 2008

Refinancing Your Home Profitably

For homeowners who thought the federal tax refund checks were a nice surprise, you may be a candidate to save a lot more than a few hundred dollars. Fixed interest rates are still at very affordable levels, so it may pay to pull out your mortgage note and do a bit of comparing. Especially if you have an adjustable rate mortgage that is getting ready to go to a higher level. Refinancing may also allow you to avoid becoming a Las Vegas foreclosures statistic!

But before you jump on the refinance bandwagon, here are a few "dos" and "don'ts" that should help in your search for the best refinance option.

· - Refresh yourself with the exact terms of your current mortgage. Know your rate, mortgage balance, monthly principal and interest payment, possible pre-payment penalty and the remaining term. Las Vegas mortgage brokers will have trouble giving you the best advice if he or she doesn't know your current situation.

· - When you get a new mortgage, each monthly payment is divided between interest costs and principal reductions. At first, most of the payment goes to interest, but over time, more and more of the loan is devoted to principal. Refinancing starts the process from scratch, which again means most of the monthly payment goes toward interest. This is not necessarily a bad thing if refinancing means lower monthly payments. Additionally, mortgage interest is usually deductible.

· - Don't get sucked into a "low" rate with high fees. Avoid paying points. One point is equal to 1 percent of the loan amount in cash. If you borrow $200,000, then one point equals $2,000. Generally, if you pay points up front you can get a lower rate--but you have to look at the cost of a point versus the monthly savings from a lower rate. It is rarely advised to pay points to "buy down" the interest rate because of the time it takes to recoup the points. But all situations are different, so a good broker or loan officer will be able to run the numbers and calculate a payback period.

· - Consider a "zero closing cost" option if available in your area. Such loans, of course, have costs--they're just not paid at closing. Instead, you'll likely pay a somewhat higher rate. Lenders around the country offer refinance rates with no points or closing costs. This will enable you to refinance your Las Vegas home without any out-of-pocket expenses or loss of home equity.

· - Think about your objectives before shopping around for a mortgage. Do you want lower monthly payments? A larger loan to take equity out of your house? A shorter-term loan, such as a 15- or 20-year mortgage? If you plan to sell within a few years, what adjustable rate programs are available? Different loans will work best in different situations.

· - Don't take a loan with a pre-payment penalty. These programs can hurt if you pay off the mortgage completely or pay down a large part of the loan early. It's best to have the freedom to pay off the loan whenever you want.

If you want to check in to refinancing your Las Vegas mortgage, give us a call and we will be happy to provide you with information on some of the best local lenders in the city.