Most people when they think of refinancing their home mortgage just pick up the phone and call around or answer an advertisement. In the long run they may be missing an opportunity to further their long-term financial goals by taking a different approach.
Your home is typically your most important investment and any loan on that home will have a long-term effect upon your finances. We advocate not only working with an experienced lender, but working with a team to make sure that your options are selected in a way that will help you today and many years from now.
Who should be part of your team? In addition to an experienced and knowledgeable lender, your team should also include your financial advisor. It is your advisor who should know where your goals lie. A tax advisor also might be part of this team because your home is likely also to represent your most important tax deduction.
Even the simplest of decisions may need the help of your advisor team. Say that interest rates have decreased and you are looking to lower your payment. Even in this case there may be several options…
- Opt for the lowest rate and pay closing costs out-of-pocket.
- Opt for the lowest rate but increase your loan amount to pay for closing costs.
- Opt for a slightly higher rate which will give you a lender credit to pay for closing costs.
What variables would affect the right decision in this regard? Your cash reserves, how long you expect to have the mortgage, your equity position and more.
And the options do not end here. There may be other objectives you can achieve by obtaining a lower rate. We will go into more on these options in our next segment.
