Refinance Strategies That Pay

September 10, 2010 Posted by Andre Hemmersbach

Just because rates are lower does not mean that you will save money doing a refinance. Careful consideration should be given to a number of factors. If your loan officer is not asking the following questions while discussing a refinance, find a loan officer who you know and trust to help you make a solid financial decision: How long you have had your current loan? How long you are planning to stay in the property? Does it make sense to pay points or do a “No closing cost loan”?
Working with an experienced loan officer that can figure out your total cost over your financial time horizon is extremely important. Also understanding your loan balance at the end of that time horizon is a consideration that must be examined if you want to make a wise decision.
The following are a couple of refinance strategies we are advising our client to consider depending on their personal objectives.
Cash-In Refinance: In last year’s fourth quarter nearly one third of all refinances had principle reductions.
This is where a borrower actually pays “cash-in” instead of the standard “cash-out” transaction to lower the balance of the current loan. The idea is that you may get a better return for your money in your mortgage savings than you would in an investment account. Two scenarios where this could save money is in the removal of Private Mortgage Insurance (PMI) and lowering your loan amount from a “Non-Conforming Loan” (greater than $729,750) or a “Jumbo Loan” (greater than $417,000).
Term Reduction: Rates are so low that some borrowers can actually keep their payments very close to the same level they now have but go to a 15 year term. This not only saves in over all interest expense over the life of the loan but usually nets the client another half of a percent off the current 30 year rate.
Refinance and invest the savings: As a loan officer that uses a consultative approach to my business, I always explain options. My clients are amazed when I show them the long term benefits of refinancing to a lower rate and then continuing to pay the old payment. It’s absolutely astonishing what happens when you super amortize (prepay) your loan.
I would be honored to help you review your mortgage and create a personalized plan for your financial situation.

About Andre Hemmersbach

Andre Hemmersbach has been working in the mortgage banking business for over 30 year helping people successfully finance their real estate holdings. He can be reached at (310) 540-1330 #137.

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