Should I refinance my home??

I'm at 6.25% fixed. I don't need cash out, I just want a lower rate if its possible, on fixed terms. My credit is 730, and I can show my income.
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I've been offered this 1% loan with fixed payments. It sounds good, it will definately save me on my payments but its tied to an adjustable index. Any thoughts on that too?

The 1% loan is minimum payment, not the actual interest rate. Usually these loans are negative amortizing. This loan are used by real estate investors looking to free up their equity and have greater cash flow. This is a way to cash out your equity every month without having to refinance every 5 years to cash out. Usually people offering 1% loan, take advantage of the situation and charge several point and Yield spreads.

With your credit score, you would probably qualify for 6.375 for a 30 year fix. And if you need to cash out the rate will be slightly higher.

If your looking to refinance check out this website the loan offers are very helpful and knowledgeable.

http://www.firstmeridiancapital.com/WhentoRefinance

If I recall correctly, when I did telemarketing for a mortgage company several years ago, they were offering 6% and they told us to only contact people who had 10% loans or higher because it would not be beneficial for the borrower unless there were 4 percentage points difference since the borrower had to pay some fee to get the lower rate. So you can judge for yourself by that statement or you can ask an accountant or CPA to be sure. Be sure to read the fine print on any contract you sign as there may be something tricky in there with the lower interest one.

Hello -

So many homeowners rush to refinance when rates decline. They shop, look for the lowest rates and lowest fees but while wrapped up in all the shopping frenzy, they could be missing the big picture. A home mortgage is typically the largest financial transaction that individuals make in their lifetime. While price is important, the paramount element of securing a home loan is the strategy of the program and how it fits into your life plan.

The vast majority of homeowners will secure their mortgages based solely upon the interest rate then wonder how to work their financial goals around it. Since there are literally hundreds of mortgage plans to chose from, the far wiser approach would be to begin with the end in mind. First, have a long-term financial strategy in place. Then you can find a mortgage that fits into and helps achieve the goal of that plan.

Just like the lost driver who refuses to ask for directions, most families do not have a financial roadmap to reach their goal or destination. They just â€œhopeâ€ that things will â€œwork outâ€. When your childrenâ€™s college education, your financial freedom or quality of life after retirement hangs in the balance, you canâ€™t afford to just â€œhopeâ€.

Letâ€™s take an example: We often see someone refinancing to save $200 per month. They decide to do this not because they are struggling to make ends meet but because it simply would be foolish to throw that money away. After figuring the after tax effect of the $200 savings, the net for most families would result around a savings of $140 per month. Unfortunately, there isnâ€™t a lot you can buy today with that. Most borrowers would simply spend the additional monthly savings and not have much to show for it in the long run.

Consider that many long-term professionally managed financial plans can achieve a long-term rate of return of 12%. This rate of return would cause a lump sum to double every six years. Okay, back to our borrowers who would save $200 ($140 net of tax benefit) per month by refinancing. Letâ€™s assume they have a very young child and have not yet put together a college savings plan. They could, at current rates, borrow $30,000 more and still keep the same monthly payment that they currently have. If invested with a professional money manager of financial planner, that money could double in six years bringing the total to $60,000 (assuming a 12% rate of return). Six years later, the total would double again equaling $120,000. Add another six years and the total would be $240,000 in 18 years. Now thatâ€™s a great way to get your child off to college! The above example, while realistic and based upon historic returns, does not provide a guarantee that the results will be as illustrated. But even if only half of the sum were achieved, the total would still be a handsome $120,000 accumulation. Thatâ€™s still far better than the net $140 per month that would likely be spent without a plan. It seems so obvious to have a solid financial plan before deciding on such a large monetary undertaking such as a home mortgage. If you are not a Dentist, would you attempt to perform a Root Canal on your spouse? (I am not asking if you want to). The obvious answer is no.

Why then do so many homeowners go so for such a long period of time without consulting a financial planning expert before making major financial decisions? That financial planning expert can sometimes be your Mortgage Planner, but check first to make sure they have the expertise to help guide you along the way.

We know with an 80% certainity that the FED will once again raise rates in August. That being said, depending on which index your adjustable rate mortgage would be tied too make a big difference.

I believe that by mid 2007 rates will again begin to be cut, and therefore an adjustable tied to the LIBOR would best.

Just to place that in perspective, 18 months ago I told my clients not to take a LIBOR adjustable and to stay with the MTA

The important thing is you are asking questions. Rates fluctuate daily.

Please let me know if you need any further guidance.

Best Regards,
Darren

If you can get an interest rate at least 1% less than you now have.

No, your rate now is about the best you can get unless you pay a few points. Also that 1% loan you are talking of is a MTA option loan, it is actually a negative amortization loan(meaning you will add money to your balance). These are very tricky loans and I don't recommend them unless you really have a grip on your finances. Also that 1% is not fixed, your true interest rate is around 7%, they just give you the option of paying 1% among others. I hope this helps.

If you did a 15 year fixed you should be able to get a rate close to your current but the problem is all rates have gone up dramatically since this time last year. If you don't need cash out and your not doing debt consolidation then a lender will even deny the loan stating there is no benefit to borrower. You have great credit so the only benefit of the 1% teaser rate being offered to you is you can invest your money in real estate or stocks and bonds or anything else. Be very careful with that loan as it is commonly referred to as a Negative Amortization loan, meaning if you elect to pay the 1% rate then you are deferring interest and could end up with owing more than originally financed. Make sure you do your homework as I've seen credit scores ruined and homes foreclosed on due to someone not fully understanding how that loan works. I hope this helps you in your decision but if you need any help or have any questions feel free to email me tadgeman@yahoo/com.

At todays rate, you would increase your interest rate

You will pay closing costs, I'd say do it only if you can get a a whole point lower that you current rate of 6.25%.

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