How to Know When It's Time to Refinance

Most LGBT homeowners continually ponder the question, “Does it make sense to refinance?” This article will cover the reasons and conditions that should exist when a person sits down and wants to figure out how to know when it’s time to refinance.

Some of things a homeowner needs in order to answer this question are very simple and available to the average consumer with some internet research and looking at your current financial paperwork. Once a homeowner has done this quick homework, it’s time to sit down and decide if this is the right time.

One of the factors that need to be considered is whether or not the new interest rate makes sense in the first place to refinance. The general rule of thumb is that if the difference between the rate on your mortgage and the current interest rates is 0.75-1.00%, now is the time to start thinking about a refinance.

If after deciding that the difference falls within or over that figure, the next thing to do is calculate how much you will save on a monthly basis. An example of this would be for a $200,000 loan over the course of a 30 year mortgage with a fixed 6.5% interest rate. As of now the current payment would be approximately $1,250 per month. So looking at the current interest rates in the market, if that interest rate is 1% lower or 5.5%, you would reduce your monthly payment by a figure of over $100.00.

The second factor that needs to be considered is how long you expect to stay in your home. If you are planning on moving out of your home within a couple of years than it may not make sense to refinance at this time. The reason being is that you will incur closing costs associated with refinancing. You need to get in touch with the lender to find out how much the closing costs are for a refinance. After you figure out the closing costs, take that number and divide by the amount of yearly savings you would experience with the refinance, and this will tell you how many years it would take to break even. If you plan on moving out before that break-even point, then you will actually be incurring more costs than if you did not refinance.

The final and third factor is what the housing market is at currently. It’s best to look at the current market values of houses as this number fluctuates pretty consistently, contact a gay, lesbian or gay friendly realtor in your city for this free data. During a period of decline, your house may appraise for less than what it appraised for when you purchased the house. This will then decrease the equity that you have in your house and may require you to put a larger amount down as a deposit or you may even have to pay for Private Mortgage Insurance (PMI), which will raise your monthly payment, possibly even to what you were paying in the first place.

If you have questions about timing, the market and current rates ~ contact a lender in your area at GayMortgageLoans.com for a free consultation.

Author Jeff Hammerberg is the Founding CEO of www.GayRealEstate.com ~ Free Instant Access to the Nation’s Top Gay, Lesbian and Gay Friendly Realtors Coast to Coast.