What to consider when you do take the next step

Anytime that you refinance your home it is important to assess whether it is putting you one step forward in your financial picture. This process should be an investment that you earn a profit from. Step one is to compare the amount you will pay back to your current loan payments versus what you will pay back with the new loan payment. See below for an example:

* Assuming that the new loan is paying the first mortgage, visa, and mastercard.

In this example, the new mortgage is paying off all 3 accounts listed above. The new payment is $600. This saves monthly payments of $300 and the payback amount is less on the new loan compared to if the loans were payed the way they were. This example assumed the 30 year mortgage was paid on for 2 years, which is how we got 28 years left to pay. Also, it normally takes up to 25 years or more to pay off high balances on credit cards because they are interest only payments.

Whenever you refinance there are always closing costs involved, so you need to make sure the investment is worth your while. Financial advisors recommend that if you can recoup the closing costs through your savings with the new loan in 3 years or less, then it is a good investment for you. Also, make sure that you calculate how much you will pay back with the new loan versus what you had left to pay on the old loan (see example above).

There are many types of loans to choose from so make sure to get a couple options and choose which one fits your financial situation. Some questions to ask that will help you know you are getting the right loan are:

Is this rate fixed or adjustable?
Will I have a prepayment penalty? If so, under how many years? Can I pay extra and not be penalized?
Is there mortgage insurance?
What are the closing costs?
How many years are we financing?
Is the payment with taxes and insurance?
Is the payment principal and interest?

These are just a few of the questions that will help lead you in the right direction. Anytime that you are working with a mortgage company it is very important to check with the Better Business Bureau at 419-531-3116. See the attached booklet “Buying your home: Settlement costs and helpful information” for other federal agencies that can assist you.

Please call Home Acceptance Corporation with any questions or to help you see if it is the right time to refinance or buy a home. You can reach us at 419-861-0348 or 1-800-523-0180.