Thursday, January 1, 2009

When Is It Time To Refinance to Consolidate Mortgage(s) and Other Bills? (Part 3 of 6)

Would you believe there are many people out there with 20-30-40-50% equity in their homes, even based on today’s current market values? Even people who own their homes free & clear of any loan? Some people look at their long term financial objectives, which may include paying their home loan off within a certain period of time, look at their budget, and steadily chip away at their loan balance. I realize we don’t hear nearly as much about these folks in the media, but trust me – they DO exist – and there are quite a few of them in the U.S.!

I have heard from such people who are looking at their future plans which include putting their kids through college, finding their retirement home or updating the home they’ve decided they’ll be staying in for the long term after all. Some of them had unexpected expenses they incurred debt for, and are looking to shuffle things around with mortgage interest rates so low. Dealing with that four letter word l*i*f*e, there are always unforeseen events cropping up, including those that affect us financially that we may or may not have been able to set aside the reserves to cover.

So, maybe it is time to shift that $50,000-70,000 worth of student loans in to a more tax advantages form of debt. Maybe it is time to buy that retirement home while values are so low, renting it out until the market turns around or the last child is launched, and it’s time to sell an existing primary residence. Maybe a young person/couple whose income has increased dramatically is looking for a second home and/or restructuring of their financing for tax purposes. Maybe your tax professional has done some year-end consulting with you and recommended a debt load be shifted around.

These are the types of scenarios which come with very specific individualized goals where a set rule of thumb cannot be used to gauge if interest rates are “low enough” to refinance. So many questions need to be answered, like:
  • How much is the interest being paid on each debt being consolidated?
  • What would the retirement home rent for, and how much needs to be put down to have it “hit break even” until it is moved in to as a primary residence?
  • How long will the home being financed be held?
  • What eligible tax benefits are available?

There really is no set rule of thumb that may be applied in these scenarios. An individual’s plan needs to be looked at and its variables taken in to consideration. Maybe other savings need to be applied to the transaction, or partial debt rolled in with the monthly savings applied to paying off the balance not paid off.

This is where bringing in the professionals to help analyze your individual plan becomes crucial. And this is also where I am reminded to thank those people who have shown the confidence to include me in their decision making processes. It is with great satisfaction I see so many people succeeding with their real estate ownership, and I’m grateful to be a part of their success.

See you at the closing table!
Karen Cooper – OR/CA Mortgage Consultant –

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