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Refinancing your Home
I was an investment advisor for one of the largest firms in the country for over 22 years and during that time, I assisted many clients in refinancing their homes. Many clients asked if they’d be better off with a fixed or variable mortgage. Due to my conservative nature, I almost always recommended that they do the fixed mortgage. My reasoning was; if you lock in a fixed rate that you know you can afford right now, it doesn’t matter where interest rates go. If rates move substantially lower, you can refinance at the lower rate. If rates move higher, you are locked in at an attractive rate. On the other hand, if you choose the variable rate mortgage and rates move substantially higher, you could find yourself in a situation where you could not afford those higher payments. Many clients wanted to know at what point they should refinance. In general, the rule of thumb is; if you can refinance your home for 1% less than the current interest rate on your existing mortgage, it is probably something you should investigate. Let’s assume that the interest rate this morning for a 30 year fixed mortgage was 6.125%. If the interest rate on your current mortgage is over 7%, you should probably begin to do some research on the Internet. In addition, you should call your existing mortgage company and make sure there is no problem (and the fees are reasonable) should you decide to pay off your existing mortgage. Of course, there are other factors to consider, fees, how long will you remain in your current home, your age, income, tax situation, etc. As with any financial decision, you should discuss the details with your tax advisor and a qualified individual specializing in refinancing homes.
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