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Oscar Dominguez: Refinancing goals

Union Bank

Posted: January 30, 2009 7:18 p.m.
Updated: January 31, 2009 4:55 a.m.

Oscar Dominguez

 

In the past few months, four Union Bank branches in the Santa Clarita Valley have received numerous inquiries about refinancing, a topic especially relevant as the economic climate continues to trend downward, and mortgage interest rates plummet to record lows.

Like many of those who have contacted our branches asking about mortgage loan rates and terms, you might be wondering if this might be an opportune time for you to consider refinancing — obtaining a new loan to pay off your existing mortgage or a business loan.

First, it is important to identify your goal for refinancing.

Goals can vary from seeking a lower interest rate on a current loan or obtaining extra cash on hand, to consolidating debt or converting a loan from an adjustable-rate to a fixed-rate mortgage.

The latter is especially relevant for home owners wishing to avoid potentially higher payments when their adjustable-rate mortgages (ARMs) reset.   

Once you’ve selected your goal, the key elements for determining optimal timing for refinancing include:   

  • Current mortgage loan rates: If the rates are at least one point lower than your current mortgage interest rate, it may be a good time to consider refinancing.
  • How long you plan to keep your property: If you plan to keep your property long enough to recover the cost of refinancing, it may make sense to refinance. Fees associated with refinancing often include initial fees for points (an upfront interest charge equaling one percent of the total loan amount), appraisals, title and closing costs.  
  • Equity: It’s important to have equity in your home before refinancing. Having equity — the difference between the market value of your home and the outstanding loan debt — places you in a better position to obtain a more beneficial loan rate.
  • Be mindful of your credit score: Now more than ever, lenders are looking for high credit scores. If you consider refinancing, review your credit score and resolve any negative issues or inaccurate information that could affect your mortgage loan rate. Since credit scores determine the likelihood of repayment, the better your score, the better your rate.
  • Contact your banker: Contacting your banker or financial advisor will provide you with added knowledge about current mortgage interest rates, loan options available to you and where you stand in terms of obtaining an optimal loan for your needs.

If you determine the timing is right for you to refinance, and you don’t have a lender in mind, consider the lender’s track record with loans while conducting your search.

It is important that your lender underwrites loans with the goal of creating long-term relationships with each customer.

A lender that intends to maintain a relationship with you will be more apt to work with you should times get especially tough.

Oscar Dominguez is vice president and branch manager of the Stevenson Ranch and Newhall branches of Union Bank. The Web site address is www.unionbank.com. His column represents his own views and not necessarily those of The Signal.

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