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If you are like most homeowners these days, you’ve heard that rates have dropped to historically low rates. You can lower your monthly payment by refinancing into a new loan. Keep in mind a few things:

When you re-finance a loan there will always be fees involved. You can avoid paying them out of your pocket by financing those costs into your new home loan. This will bump up your monthly payment a little bit but can be worthwhile if you are significantly reducing your interest rate.

Resetting the clock

You may be a few years or perhaps many years into your mortgage payments. So currently you have fewer than 30 years of payments left. Before you re-finance, consider how old you will by the time you pay off the new loan 30 years hence. Will it cause you to have to delay retirement? Do you want to trade off a lower payment now for more years of work before you can retire? Look at your latest loan statement and see how much of your monthly mortgage payment goes to interest versus paying down the loan. Now compare it to your very first statement. If the portion going to interest has dropped significantly, do you really want to return to most of your monthly payment going to interest once again?

Credit history

Though you may think you are eligible for a loan, you need to look at your credit report to determine if both your credit score is high enough and if your credit history shows a pattern of on-time, in-full monthly payments. If you inquired about forbearance, your lender may have labeled the loan as now in forbearance. This mistake can happen even when you are still making your full monthly payment and have been doing so all along.

Personal factors

Is re-financing a bad idea? Not necessarily. You may have very compelling personal reasons to re-finance. These can range from reduced income to needing to tap the equity in your home to having so much equity that you can even eliminate mortgage insurance. Any of these and more can be reasons to lower your monthly payment now in return for paying for a while longer.

Before you dive head long into a refinance, discuss your goals with your lender. Find out what will change and what will remain the same (for example, your property taxes will not change). Once you have this information, you can see if it is worthwhile to lower your monthly payment.

If you need help with re-financing, I offer wholesale rates, an easy way to apply (fakrizubek.zipforhome.com) and I am always available to discuss the loans that apply to your situation at 760 622 5087.