Our team of financial advisors collaborates with many local specialists in the markets we serve. I asked one of those specialists, Scott Cummings of Fairway Independent Mortgage, to provide a guest blog post regarding the recent drop in interest rates and the buzz around mortgage refinancing. Feel free to share Scott’s content with friends and family who may benefit from his insights. –Brian Cochran, Financial Planner CFP®, CKA®
Homeowners are constantly bombarded with ads on the internet, television and radio urging them to refinance their mortgage loans. Everyone is telling us that “Now is a great time to refinance!” But how do homeowners know when it’s really the right time to refinance their mortgage loans? In addition, how do they know if the potential benefits outweigh the costs of refinancing?
To start, homeowners need to lay out their own individual financial goals and objectives, and ask themselves several important questions:
- What is a meaningful savings for them to incur the costs of refinancing?
- How would they use these potential savings to improve their personal finances?
- How long will it take them to offset the costs of refinancing with the savings from a lower mortgage payment?
- How long do they plan on living in their home before they may sell it?
- How does their current monthly mortgage payment impact their ability to save, fund college savings plans and fund their retirement investments?
- Should they go with a shorter-term mortgage to accelerate the prepayment of their mortgage loan?
- When are they planning to retire?
- When would they like to pay off their mortgage and own their home free and clear?
These considerations illustrate the fact that how an individual handles their mortgage loans impacts every area of their finances. Therefore, it is critical to get the advice and input of an experienced mortgage professional. Someone who will spend the time reviewing their finances and goals for refinancing, then create a detailed spreadsheet analysis comparing several different possible mortgage financing options over the estimated length of homeownership. This analysis should break out estimated closing costs, estimated monthly payments, etc. More importantly, it should amortize and compare these costs and the interest incurred for each mortgage option over both the homeowner’s short-term and long-term plans. This will allow the homeowner to see the impact of each possible loan option over a defined period of time, and enable them to select the lowest cost mortgage that meets their financial goals and objectives.
–Guest Contributor Scott Cummings
Fairway Independent Mortgage Corporation
Copyright©2019 Fairway Independent Mortgage Corporation. NMLS#2289. 4750 S. Biltmore Lane, Madison, WI 53718, 1-866-912-4800. All rights reserved. This is not an offer to enter into an agreement. Not all customers will qualify. Information, rates and programs are subject to change without notice. All products are subject to credit and property approval. Other restrictions and limitations may apply. Equal Housing Lender.
Any opinions are those of the author and not necessarily those of RJFS or Raymond James. Raymond James Financial Services and your Raymond James Financial Advisors do not solicit or offer residential mortgage products and are unable to accept any residential mortgage loan applications or to offer or negotiate terms of any such loan. Raymond James is not affiliated and does not endorse the services of Fairway Independent Mortgage Corporation or Scott Cummings.