Tehama Country Real Estate

6 – Tehama Country Real Estate When Do You Know It's Time to Refinance Your Home? Real Estate Spotlight By Alex Mason The decision to refi- nance your home should be well researched and done at the appropriate time. The key to a suc- cessful refinancing is to examine all your options and make a sound deci- sion from your head and not your heart. When dealing with your finances, remember to think before you react, no matter what the sales pitch may be from a re-fi company. With a good refinance, you have every- thing to gain. With a bad refinance, you can lose your shirt. Reasons To Refinance Not every home loan borrower applies for a refinance simply to lower the monthly mortgage payment with a better interest rate. In some cases, the decision to refi- nance is made to pull cash out of the home's equity. A successful cash-out transaction requires suffi- cient home equity to have some financial leverage over the current market value of a home. In addition, the borrow- er may wish to add the refinance charges to the end of the loan balance for a no-money-out-of- pocket transaction and instant access to cash. secured one. Should the increased mortgage Require- ments To Refinance The first step in a home mortgage refi- nance is to have the prop- erty appraised. The more current the appraisal is, the better it will be in an unstable real estate mar- ket. To qualify for a re-fi, the home must appraise for more than the current loan balance. Homes that were purchased with zero down, have little equity, and were bought at the height of the real estate boom are not a likely can- didate for a new refinance loan product. Refinancing Fees The payment to refi- nance a home is paid to the loan broker who will shop the banks in order to secure the best new loan option for the client. The fees will vary from one company to the next, but the service fee should be less than 3 percent of the new loan balance. The borrower may wish to pay up-front for the ser- vice which will save money in the long run. However, most borrowers in need of a cash-out refi- nance prefer to add the fee to the new loan. Shop well and shop wisely before sign- ing on the dotted line. Reasons To Pull Cash From Your Home Your home is your bank and may have a lot to offer you with a cash pull- out from its equity. However, temptations may creep in to take your equity and run with it on items that offer you little in return. If the cash sum is to invest into your prop- erty to upgrade or enhance the resale value, then the cash extraction will serve you well. Add another room, upgrade your HVAC or drop a swimming pool into the backyard. It's all good if you can sell the home and get back every cent you invested. Reasons NOT To Pull Cash From Your Home A debt may be secured or unsecured. Your home and vehicle are secured, as the bank will take pos- session of such items should you default on the loan. Credit cards and non- tangible items are unse- cured, though, meaning if you default, there is no repossession possible. The worst thing to do financially is to take an unsecured debt and pay it off with a loan against a grow to an amount that you no longer can handle, poof goes your home with a Notice of Default. In addition, you want to avoid purchases that depreciate such as buying a new automobile with equity from your home. In time, the car will end up at the junk yard, and you will still be paying top dollar for the equity you extracted from your home. Read Your Loan Documents When you are ready to refinance for a cash sum or to lower your payments with an attractive interest rate, be sure to read the fine print on every page of the new loan document. Terms such as "fixed" may be applied to loans that will adjust in interest, so read the terms and con- ditions slowly and ask questions for every page. Once you sign a loan document, you will gener- ally have no legal recourse in court should the loan language on the document confuse you. Contracts can be tricky, so be alert, read carefully, and sign nothing unless it is crystal clear. Alex Mason is a former real estate agent and mortgage broker living in Los Angeles.

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