Refinance Your Colorado Mortgage

What is your goal for refinancing?

Do you want to pull equity from your home to consolidate debt, or for some other financial goal? This can be accomplished one of two ways: You can do a cash-out refinance of your mortgage which results in money coming out of the transaction (to pay off debts or for cash in hand). Or you can do a second mortgage, in the form of a Home Equity Line of Credit (HELOC) or a "straight second" (same result, different process). Your mortgage consultant will help you evaluate your options for pulling equity so you can make a smart decision about the best solution for your circumstances and financial goals.

A client was recently referred to me who had $17,000 in consumer debt, was three years into a thirty year mortgage, and had just taken out a second mortgage to pay for a new kitchen. She told me she wanted to pay off her first mortgage in fifteen years without changing her payment. I ended up helping her refinance and pay off all her debt and put her on a program (without changing her monthly expenditures) that will have her completely debt free in eleven and a half years - including owning her home free and clear.

Lower Monthly Payment: The old rule of thumb was, if the homeowner could lower their interest rate by two percentage points, refinancing made sense. This is a great rule of thumb, but many borrowers who are not able to lower their payment by two points may miss out on opportunities to save money waiting for interest rates to drop.

I recently contacted clients who had refinanced just over a year ago. My system for tracking clients' mortgages and comparing them with current market rates let me know these folks should think about refinancing. I was able to help them refinance again for free (they didn't use up any of the equity in their home, nor did they use up any of their savings) with a monthly savings of $225, more than $12,500 saved over the life of their fifteen year mortgage.

Another couple are now saving $135 a month for free, more than $67,000 saved over the life of their thirty year mortgage.

Here are a couple of additional thoughts that may be worth considering:

• You may be able to remove private mortgage insurance through a refinance. Of course you may be able to remove private mortgage insurance without refinancing - talk with your mortgage consultant to find out what your options are.
• The big question as you evaluate your refinance needs to be "what is my break even point?" This question addresses the costs associated with the refinance and how long it will take for you to pay for these costs (your break even point) and begin actually saving money. For example, if the cost of refinancing is such that you won't break even for five years, and you plan on moving in three years, refinancing does not make sense. Your mortgage consultant should calculate your break even point for you as they help you evaluate your refinancing options.
• "No cost" refinance options are available for many different types of mortgages. This means that the cost of the refinance is built into your interest rate, rather than taking equity in your home to pay for the refinance. The benefit of looking at this solution is that there is no break even period - the refinance pays for itself immediately - you save money the first time you make your new monthly mortgage payment. It also means that should interest rates drop further, you can take advantage of another "no cost" refinance without frittering away your equity. Talk with your mortgage consultant for more details about this refinancing option.

Look here for more more detailed information about refinancing a Colorado conventional, FHA, VA, jumbo, or alternative mortgage.

Your mortgage consultant will help you evaluate whether refinancing makes sense (in the case of lowering your monthly payment) or which option for pulling equity out of your home is best given your financial goals.

Last updated: Monday, 11-Aug-2008 21:24:03 CDT

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