REFINANCE

Is your mortgage a debt or investment? Refinancing isn't as simple as just getting a lower payment. For many people their mortgage is the debt that prevents retirement. On the other side of the coin if you treat your mortgage as an investment tool you can attain retirement earlier in life.

Term

If you can keep the same term and lower your payment with no cost it always makes sense to refinance. Most people don't know this is possible and thats why its my favorite loan to do.

For example: If you currently have a mortgage with 23 years left and a payment of $1500 it will make sense to refinance if I can get you a new loan at 23 years with a $1450 payment.

As long as there are no costs, if there are closing fees then the breakeven point will need to be calculated.

Payment

The most common reason people refinance is to get a lower payment.

Your cash flow stream can help in many ways. For example if you have substantial credit card debt it can make sense to lower your mortgage payment to enable you to pay it off.

Quality of Life

Most likely you will be paying on a mortgage for 30 + years of your life. Think about it, every time you move you start over with a new loan. I talk to people in their 80's and 90's who still have mortgages and in some cases long terms left.

Do you want to spend half your life worring about bills? You have to have balance here, be responsible but don't set yourself up to be house poor. House poor is when all you can afford is your house payment. Be sure to have a cushion in case a life altering event happens

Talk with your spouse, most divorces are casued from financial issues (not infidelity).

Make sure you are both on the same page and can have the same goals with your mortgage. If you see your mortgage as a debt and your spouse an investment, this can lead to problems down the road.

Tax Implications

Mortgage interest is tax deductable. This means you actually get money back at the end of the year on your taxes becasue you own a mortgage. Depending on your tax bracket this can have a significant impact in a desciosn to refinance.

SCHEDULE A CONSULTATION

Cash

Pulling the equity of of your home can make sense as long as you use the funds responsibly. You have to be real with yourself. If you are going to pay off credit cards with your equity and then run them up again in 3 years whats the point!

If you have no money in the bank for an emergency it may also be wise to take equity out. At some point in everyones life an unexpected finacial hardship will occur, loss of job, death in the family, car wreck, fire, etc...

When this moment happens make sure you're prepared. If your home goes into foreclosure what good is the equity?