Should I make the choice of refinancing my home in San Diego?

 

With months of the housing market in San Diego at the lowest it’s been in years, recent months have shown a slight increase of interest rates. The idea of refinancing a mortgage still is an appealing idea, because interest rates are expected to jump to five percent or higher by August 2014, according to a Freddie Mac Report in 2013.

Many experts agree with the idea of refinancing your mortgage, as they spoke with Scoop San Diego.

“The window hasn’t closed, but homeowners should analyze t heir mortgage situation to see if a refinance can improve their overall financial picture,” said Director of Real Estate Product Management at USAA John Young to Scoop San Diego.

“When market rates were at 3.5 percent, 90 to 95 percent of outstanding loans would have benefited from a refinance,” said Mike Fratantoni to Scoop San Diego, the Vice President of Research and Economics at the Mortgage Bankers Association.

But why should you refinance your San Diego real estate?

First of all you could pay off your mortgage early. A big jump in monthly payments that could save thousands in interest and equity building in your faster is moving from a 30-year term to a 15-year term.

You could create more cash flow. With the interest rates being lower, it could enable you to make lower monthly mortgage payments and free up so money to pay debt or make more room for your budget.

Now that you have borrowed more money by getting funding out with the refinance option, and use those funds to cut other debt or you could remodel your home in hopes to sell it at a higher price than you bought it.

“As home values start to rise, there is some pent-up demand for a cash-out refinance to access the equity in the home for other purposes,” said Real Estate Product Management Director at USAA Diane Brooks to the Scoop San Diego.

Are there any benefits to refinancing your home in San Diego?

Mortgage holders are put into three different categories according to Fratantoni: Already refinanced, already refinanced through federal programs and current candidates for traditional refinancing.

Already refinanced: The customers with the strong credit, a lot of home equity and job security are the ones that lie in this category. In the past few years, they’ve received a secured rate in the low to mid three percent when they’ve refinanced their homes.

Refinanced, but through federal programs: These are customers with a good credit history and employment who don’t have enough equity to qualify for traditional refinancing. They use the HARP program, or the Home Affordable Refinance Program. This is lucrative for homeowners that have mortgages that are more worth than their home. Many qualifiers have gone ahead and refinanced.

Current candidates for traditional refinancing: If you had a job loss, credit issue etc., but have regained themselves financial footing, this is a viable option.

The numbers won’t always reveal how much you need more funding in your budget. However, when the numbers aren’t ideal, just keep in mind you are leveraging your home. A higher interest rate on an could help you obtain a lower and more affordable monthly repayment.

“On a 30-year loan, you can make a larger monthly payment to pay the loan off in 15 years,” Young said to Scoop San Diego. “If you run into cash flow problems, you could always make the minimum payment. Refinancing for a 15-year loan, while getting you a better interest rate, will also get you a higher minimum payment that must be paid on time.”

By Linda Moore

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