REFINANCING: THE RIGHT MOVE?

refinance

REFINANCING: THE RIGHT MOVE?

If you have an Adjustable-Rate Mortgage, consider these factors about refinancing.

The federal reserve recently raised interest rates, and if you have an Adjustable Rate Mortgage (ARM), it may be a good time to consider refinancing your home. There’s no one-size-fits-all answer to whether your should refinance, so here are a few of the main considerations.

How long does your introductory rate last?
Most ARMs have a fixed rate for the beginning of the mortgage. This is an introductory period (usually 3-10 years) when your rate will remain constant before it can be adjusted. If you have several years left in your introductory period, you can monitor interest rates for a while before making a decision. But if the intro rate is ending soon, it’s a great time to explore refinancing at a fixed rate.

How long are you staying?
If you plan to sell your home soon—especially if you’re still on a fixed introductory rate—there’s not much motivation to refinance. But if you’ll be at your home indefinitely, you should consider your refinancing options. You could eliminate the stress of not knowing what your future mortgage rate and payments will be.

What’s your loan balance?
The change in your mortgage payment will of course be determined in part by your remaining balance. If you owe $100,000-$200,000, a new interest rate may not greatly affect your monthly payment. On the other hand, if you owe $500,000, a change in interest rate could lead to a much higher payment.

Other factors
The previous items are just a few of the factors that should go into a decision about refinancing. Changes in income and your current credit score should also be considered, so be sure to weigh your options and make an educated decision.

DRIVE TIME

drive time

HOW YOUR DAILY DRIVE TIME CAN FACTOR INTO YOUR MORTGAGE

It’s easy to overlook some of the things that can affect your budget and purchasing power when you’re considering a home, and one of the biggest factors that buyers overlook is the cost of their daily commute.

We’ve all heard that real estate is all about “location, location, location,” and properties in more desirable locations typically come with a higher price tag than similar properties that aren’t in a hot neighborhood.

Yet the overall cost of living for choosing one location over another might be negligible when you factor in the commuting costs that are required—gas, vehicle maintenance, insurance—if you purchase a home that is significantly further from your workplace. If your mortgage is $200 less per month, but you’re spending an extra $200 in commuting costs, are you really saving money?

Commuting costs aren’t just about the disposable income left in your bank account, either. It can even affect how much money you can borrow. If you’re a long-distance commuter, a loan officer may factor your travel costs into your debt-to-income ratio.

Aside from how commuting affects your purchasing power or disposable income, there’s also the question of how it affects your quality of life—no one wants to spend hours a week just getting to and from work.

The real estate market varies greatly from location to location, so the best way to get a complete picture of your purchasing power—and all the factors that go into your home budget—is to speak to your trusted real estate professional.