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Janice France-Pettit: Is it time to refinance

A few things to think about, if you're thinking about your mortgage

Posted: February 5, 2010 10:25 p.m.
Updated: February 6, 2010 4:30 a.m.
 
With mortgage interest rates near record lows, many home owners are considering refinancing. You may be wondering if this is an opportune time for you to refinance.

Before you decide to refinance, consider your goals: You may wish to secure a lower interest rate. Perhaps you would like to consolidate debt or convert an adjustable-rate to a fixed-rate mortgage.

This situation is especially relevant for homeowners wishing to avoid potentially higher payments when their adjustable-rate mortgages (ARMs) reset.

Following are some other points to consider that may help you determine if refinancing is the right choice for you.

Rates
In general, if you are able to reduce your interest rate by 1 percent, you may want to consider refinancing. However, if you have a jumbo loan, you may want to refinance if the rate is only .25 percent lower. A jumbo loan is an option for borrowers who have a loan amount that exceeds the limits set by Fannie Mae or Freddie Mac.

Your lender may provide you with the most up-to-date information on the current limits of jumbo loans since they can fluctuate and typically vary from state to state.  

Mortgage calculators found online (such as the Union Bank calculator at www.Unionbank.com) may also help.  

Equity
Before you decide to refinance your mortgage, you should verify how much equity you have established in your home. Having equity may place you in a position to obtain a more favorable loan rate.

Credit Score
Having a strong credit score — 740 or higher — may help you achieve a lower interest rate (if your lender does risk-based pricing).
If you are considering refinancing, it is recommended that you thoroughly review your credit report for any errors. There are several online services that can assist you with finding out your credit score, such as Experian.com and Equifax.com.
Consumers can request a free copy of their credit report every 12 months. To receive your free credit report, you may visit www.annualcreditreport.com.

Duration
To help recover the costs of refinancing, consider how long you will live in your current home. Refinancing involves fees for appraisals, title and closing costs and often includes points (an origination fee based on a percentage of your loan amount).
If you do not plan to live in the home long enough to recoup these costs, refinancing may not be a sound option for you.

Relationship with your lender
Once you make the decision to refinance your mortgage, the next step is to team up with a trusted lender. It is advisable to seek a lender focused on creating long-term relationships with clients.

A lender that is invested in your relationship is likely to be devoted to helping you, even when times are tough. Since mortgage interest rates and loan options are continually changing, your banker can help keep you up to date and make recommendations.

The foregoing article is intended to provide general information about creating a trust and is not considered legal, financial or tax advice from Union Bank. Trusts, wills, foundations and wealth planning strategies have legal, tax accounting and other implications. Please consult a legal or tax adviser.

Janice France-Pettit is a senior vice president and regional manager for Union Bank, overseeing the Simi Valley, San Fernando Valley and Antelope Valley regions. Her column reflects her own opinion and is not necessarily that of The Signal.

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