When Does It Make Sense to Refinance?

Dana C. Gounaris

Mortgage interest rates today are historically low. In light of this, many homeowners are asking, “How do I know if it is best to refinance?” The answer is very much circumstantial. There are three broad categories when it comes to refinancing: rate and term; cash out; and life circumstances.

Rate and Term
The most common type of refinance is a rate and term refinance. A rate and term refinance involves either lowering the interest rate; changing the term; or a combination of both. The goal of a rate and term refinance can be to save on the interest costs; change from a longer to shorter term (or vice versa); or to change from an adjustable to a fixed rate. In order to decide whether or not refinancing for these reasons makes sense, a mortgage consultant can present a break even analysis to help determine the short and long term benefits.

Cash Out/Debt Consolidation
Borrowing against a property is one of the cheapest ways to borrow money. With the property as collateral, lenders are willing to lend at very low rates with loan lengths up to 40 years. Cash out refinances are available for reasons such as college expenses, home improvements, investments or debt consolidations. Cash out refinances are permitted up to 95% of the homes’ value for qualified applicants.

Life Circumstances
Sometimes refinancing makes sense due to life circumstances. Divorce, separation, or inheritance may prompt a refinance for name change, rate and term, or equity buy outs.  

Dana C. Gounaris can be reached at 856.905.9017 or Dana is a mortgage consultant for Trident Mortgage Company and handles mortgages in both New Jersey and Pennsylvania. Dana was selected as a Top Mortgage Professional by Philadelphia Magazine for the year of 2010 and scored highest in overall client satisfaction.


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