Is it really a good idea to refinance?

Question

We currently have an interest rate of 7 1/2%, but need some critical home repairs done that we can't afford. Wondering if refinancing and getting some cash is the best idea right now. We've been in the house 10 years.

Answer 1

You should have refinanced 2-3 years ago when rates were <5%.

If you can get a better rate now, sure go ahead and refinance.

Answer 2

Now are you talking about Refinancing your house or taking a home equity loan or doing both?? What ever you do can make a difference as to what is happening. If the interest rate is better now than when you purchaced your home, than it may be worth doing it as it will save you money in the long run. It is a good idea to speak with some one at your mortage company and they will be able to give you the information that you need. I do believe that either way you must have an appraisal done before you do either of theses. Don't forget that there also may be closing costs involved too.

My mom and I bought a duplex in San Diego, Ca. back in 1984 and in order to lower the payment and the interest rate, we refinanced it. Of course we waited for quite a few years before we did it. We did this over a span of years, we ended up refinancing it a total of three times. We lowered our payment from about $1690.00 a month to around $880.00 a month, so in the end it saved us a lot of money. Keep in mind that we didn't borrow money any of the times we refinanced it, we only wanted to lower our payment. Having a lower payment helps as the extra money can be put aside each month and then used for repairs. In our case it saved and extra $810.00 each month, so in the end we cut our payment in half which was really great.

Another thing to keep in mind when you do this is that it starts your mortgage all over again. So that if you have a 30 year loan and you have paid off ten years off already, it will start all over at 30 years again.

What ever you do decide to do I wish you a lot of luck, I'm sure every thing will work out just fine for you. Before you know it you will be tackling your critical home repairs in no time. Best of wishes to you.

Answer 3

It really depends on how long you plan on staying in the house. If you plan on moving in the next 3 to 5 years. A HELOC or Home Equity Line Of Credit may be the way to go. If you plan on staying longer you may want to check out refinancing. The reason is 1. You may want to take out that money for your emergency repairs and payoff any or all debts you may have or 2. You are going to live in the house longer than 3 to 5 years and by your loan amount going up and interests rates relatively low still your payment may not change a whole lot. 3. Refinancing costs are usually rolled into the loan and average around 3% of the loan amount.
Bottom line is a good Mortgage Consultant can sit down with you and go over a comparison of the pros and cons of doing either a Heloc( which can be fixed or adjustable) or refinance your home.

Answer 4

Since you've been in the house so long, a home equity loan or line of credit would also be an option. It'd be cheaper than the processing costs of refinancing. You'll have a slightly higher interest rate in paying down the home equity loan, but since you'll be paying it over a much shorter period of time, it should cost less versus spreading the repayment out over the period of your mortgage.

The old rule of thumb for refinancing was "at least two percentage points lower", but with much bigger differences in fees and costs to process the mortgage with all of the current vendor options, it can make sense with the right deal.

Shop around and ask for all of the fees and costs associated with either option.

Answer 5

Compare the cost of refinancing including the increase of interest over the life of the loan to the cost of home repairs, it might be wiser to do the repairs in pieces. If the cost of refinancing no where nears the cost of the needed repairs then talk to a reputable lender for advice, it might be that a line of credit loan or other type of loan might be wiser. Other wise the equity in your home is there as a savings account use it wisely, it always costs you money to do it and you don't want to get over your head on the payments.
Buena Suerte

Answer 6

If your credit is decent, you should be able to drop your rate down to about 6.00-6.25% for a 30 year fixed rate right now.

With any luck, you can get the cash you need for the repairs, and keep your payments the same or less than you're paying now. The rate savings will help absorb a decent amount of the increase in balance.

Answer 7

What are you paying right now? Are you in a fixed rate mtg now. How long have you paid on your mtg (10 years)??

Have you considered a HELOC? One that you can take draws from and payments are based on the amount you take out. Or you could take out the full amount at the same time, and the payments are based on the full amount.

First: Contact your bank and see if you qualify for a line of credit - For the available equity you have in your home... You did not mention what your current payment - interest rate - and term (as in years) you have had your mortgage. If you refinance, and if you have good credit - than the rate will be better - but if you have poor credit, than your payment will be higher - since rates are going up - Good credit rates are 6.5 (roughly) and if bad credit 8.99 (par) Big difference. A par rate is what a lender will give you thru a Broker, (for instance I underwrite for over 150 company’s). If you go with one lender they pull your credit, than if they can not do it, you go somewhere else, and they pull your credit. You need to see a Broker, where he/she pulls your credit one time, and the lenders will use HIS/HER credit to qualify you....But write down your total monthly debit (payments), and amount owned, Cost of repairs needed. say you have a repairs of 15,000 and your debit is 20,000 and you are paying a monthly payments of 240.00 (just an estimate - OK) Your current mortgage is 300.00 So if you refinance at 125,000 at 6.5 percent your Principle and interest will be 790.09 not including taxes and insurance....the same loan amount at 8.99 rate is 1,004.88 This just gives you an Idea -- When a Broker takes an application, (that is called the 1003), you will get a Good Faith Estimate and Truth in Lending from them with in 3 business days, that is the RESPA law (at least it is here in Indiana)...The GFE (Good Fair Estimate) will tell you your fees etc.....I have seen rates higher than 8.99 for poor credit - if you need 100 percent at a fixed rate (it would be 6.50 or higher) this just gives you an Idea.....Good Luck to you - A Broker, who cares, will go over it all with you and be in contact with you daily. The one on one customer service is important, to you, the client, to let you know the whole loan process.

Answer 8

30 year fixed rates are currently around 6.5 % so you may be able to get a lower interest rate, assuming your credit score is good.

Be careful not to take more out of the house than you need though. Your goal is to get MORE equity in the house not LESS.

Answer 9

I would think it is a good idea. You can still get a 30 Year fixed for about 6% and that ain't bad as they say.

You could get an equity loan, which is what I would suggest if your first mtg is at 6 or 6.5. But you might as well lower your first mtg too.

Answer 10

Well, the lowest rate on the market is 5.875%. Unless the market conditions worsen, the rates will only go up. I can help you refinance.

513-860-2940 Ext 10

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