Rates are screwy… the Florida Real Estate Market is terrible… Alan Greenspan is talking about recession… Ben Bernanke is  lowering rates with a baseball bat… Barry Bonds was using steroids but a typo might get him off… Roger Clemens was maybe using steroids but he’s going to get a presidential pardon…

and you think NOW is the time to refinance?

Well… you MAY be right… you may be crazy.

Ok… as kitschy as I might have started this piece I do mean to make it a quality mortgage related article to help those of you looking to make a tough decision.

Many people are currently getting calls from their lenders offering to lower their rate… even if sometimes the deal is too good to be true or has a hitch of some sort.

But is now the best time??

There are a few things to consider if you want to make this decision.

1. The Cost.  We all know there are closing costs involved in any mortgage transactions.   We also know that paying taxes and processing fees is hard to avoid.  They are simply a cost of doing business.

   But what do you do when the lender says, “We will do this with no taxes (stamps in Florida) and for only $500″…

   What about when they say something even more provocative such as, “If we do X loan for you then we won’t even require an appraisal!”

   Yes… I said it… 

   As far as costs are concerned.  Remember the cardinal rule of lending.  If you are working with a bank as opposed to a broker, they do not have to disclose all costs and fees up front.  This can mean that there are some other junk fees or whatever rolled into the loan amount. 

   You don’t “feel them” right away but they do show up in the APR.  The APR is basically the total cost of the loan including interest and fees paid in advance. 

   A 1/10th difference in the Interest Rate and the APR can be several hundreds or even thousands of dollars in fees depending on your loan size!

   So the best way to understand costs in such a serious decision is the same way you would in any such decision… get a second opinion. 

   Not from your family… not from your friends… unless your friends and family are Mortgage Professionals.  The only real way to understand the numbers and how they affect you is to let someone that does the math on a daily basis run the numbers for you. 
   

2. The Terms.  So you have an ARM and all the news on Robin Meade’s Morning Express and Suze Orman’s radio shows tell you you’re in deep doo doo.  So you want to change the terms while you refinance.

   Just because you have an ARM right now does not mean you HAVE to get a fixed rate mortgage because of some bad press.  The ARM you have may fit you quite nicely still. 

   Sure… it may adjust up on you in the future… but how far in the future??  Do you still have 5 years left on a 10 yr ARM?  or a 7 yr ARM? 
   
   Where will YOU be in 5 yrs?  Still there?  or will you have to move on to another locale or bigger place … or to the suburbs with your 2.3 kids and dog?

   Also… what if the ARM that you are offered is for a shorter period of time than your current loan?  Does it fit you still?

   And really… is the 30yr Fixed in your best interest?  If the payment is lower, so be it…but if it isn’t, then what’s the rush?
   

3. Rates… ok so everyone is clamoring about where rates are today.  But well… fixed rates have gone up this week (February 2008) and ARMs have gone down.  Maybe if you had made your decision in January you would have gotten a better deal… or maybe if you look at analysts’ forecasts you will see that they think the LIBOR and MTA indices will continue to drop in 2008…. so maybe you should wait??

   I do not have a crystal ball and no malpractice insurance is available for Mortgage Brokers who prognosticate on the market… so I won’t.

   What I will say is that if the deal works for you… if the rate beats your current rate and all other things remain equal, then you have to figure out the next factor…
   

4. Payment… so how much are you saving a month??

   If your savings add up in a short period of time to be more than the cost of the loan… then it might just be worth it. 

   Think about what that extra $200 per month would help you do! Pay down a credit card faster!  Get a few more nights out with the wife!  Or even sock away some money for later in life instead of betting on the Retirement Fairy to pay for your golden years in Boynton Beach, Florida.

   If you are saving less than $100/mo, it might not be the best choice for you to refinance.   Unless it is really straining you… like you are $25 in the hole every month and there is no chance for overtime pay.  $25 can still add up but $25-100 might be easily shaved off if you just look for the opportunities like buying a thermos and making coffee at home rather than buying it out.

So you see… there are many factors to consider in your quest to make a bold decision.  They should not be taken lightly.

The best advice I can offer is give a call or email me your scenario.  We’ll chat for a few minutes and see what we can come up with for you as far as an answer is concerned.

Have a quote from a lender already?  I can at least help you cut through the mess and come out with a better understanding of your lender’s numbers.  Heck… and if I can beat their scenario, I’m sure you’d be happy to work with your friendly, neighborhood mortgage broker instead!

More Real Estate Industry News You Can Use from
David A. Podgursky, MBA
The Mortgage Go To Guy!
Your Source for Residential and Commercial Mortgage Loans in Florida