Mortgage Refinancing for LGBT Homeowners

Mortgage interest rates recently fell so low that they broke all-time historical records, and rates have managed to remain extremely cheap and attractive for the past couple of months. Even before they shattered those longstanding records mortgage rates were already a bargain, however, and in this kind of highly appealing and extremely rare mortgage environment many LGBT homeowners are trying to decide whether or not to go ahead and refinance.

The question usually boils down to whether it is best to go ahead and refinance now (while it is definitely possible to lock in a great rate) or whether it would be even more profitable and savvy to wait with the expectation that rates will fall even lower. 

Those LGBT borrowers who wait might qualify for the bragging rights to an even better deal. But they could also get whiplashed if rates suddenly start their long anticipated climb. Ultimately the choice relates to a question of investment risk versus reward, and in today’s market it is prudent to consider as many angles and outcomes as possible before making a final decision.

A few years ago when rates were more volatile – and the Fed was slashing them dramatically almost every month – homeowners had a tendency to refinance often in order to capture incrementally lower rates. But the cumulative impact for many of them was that they racked up so many closing costs that the expenses undermined their strategy and left them worse off than they would have been if they had kept their old rate.an

For most LGBT homeowners it will usually be wise to wait until the savings that can be gained by refinancing reach a level of at least two percentage points. That way it is possible to minimize the costs of application fees, points, and other expenses that are part of any typical refinance package.
Here’s an example:

Spend $1,500 to refinance and lower a monthly mortgage payment by $50 and it will take 30 months to recoup the closing costs. That doesn’t make sense for the LGBT owner who might sell within the next three years.

But spend the same amount to reduce a mortgage payment by $150 and the benefits will start to show up within less than a year. During the second year it will be possible to capture net savings of about $1,800 and within a seven year timeframe the refinance will generate net returns of $10,000 or more.

To crunch the numbers realistically it helps to speak to a knowledgeable mortgage broker or loan officer who can more accurately estimate total closing costs in today’s market. They can also explain any available discounted loan packages they happen to be offering. Be sure to factor in miscellaneous expenses or savings related to such things as mortgage interest tax deductions or monthly payments for private mortgage insurance, because those may also significantly affect the bottom line.

Potential savings will always depend upon the type of loan, any available discounts being offered by lenders, and the timeframe for staying in the house before deciding to sell. Keep in mind that the ultimate goal is not just to capture a lower interest rate, per se, but to realize actual net savings.

With that goal in mind it is easy to see that LGBT homeowners with higher loan balances will generally gain more leverage from a refinance as long as they can keep the closing costs under control, because even a relatively small percentage discount on a high-dollar loan can yield substantial savings. Condo owners fall into a slightly unique category, however, and need to calculate savings a little differently. Lenders often require at least 20 or 30 percent equity before they will approve refinancing of a condominium loan and they may also charge higher points and fees. That’s because banks typically assume slightly higher risk on condominium mortgages, so LGBT condo owners should consult an experienced LGBT-friendly mortgage expert to ensure they get the best possible refinancing terms.

If the current loan contains a prepayment penalty clause that will also trigger additional fees which may be substantial. Those need to be factored into any refinancing calculations because they will lengthen the time it takes to break even and start realizing net savings.

Although the 30-year mortgage is by far the most popular, LGBT homeowners should also take a good look at 15-year fixed rate mortgages because with rates so low the monthly payments on those are now quite reasonable. Those who intend to live in their home for life can refinance into a 15-year mortgage and the amortization schedule makes it possible to own the property free and clear within just 15 years while building fast equity. That’s a fantastic accomplishment and can be incorporated into a savvy retirement plan for those who are now within 15-20 years of retirement age.

For great mortgage rates and expert help with all your real estate needs contact a gay realtor at www.GayRealEstate.com or a gay, lesbian or gay friendly mortgage professional at www.GayMortgageLoans.com. Or call toll free at 1-888-420-MOVE (6683). The members of these networks are dedicated to active support of the global LGBT community.