When taking a look at refinancing your home there are many factors to consider. Whether you’re refinancing to access funds for pleasure, an investment opportunity, debt consolidation or to help out someone you care about, I would take a look at the most common questions people have below.

– How much money will I save if I consolidate my existing debt? Credit card, car loans and lines of credit carry higher interest rates than mortgages. In many cases, this is a huge burden on your monthly cash flow. Refinancing your mortgage is often the best solution because interest rates are much lower than other credit products.

– How many years should I refinance for? Depending on your financial situation you may opt to increase your mortgage up to 30 years to keep your payments lower. You can then take advantage of prepayment privileges to increase payments or make a lump sum payment directly towards the principle.

– What will be the financial benefit if you’re using funds for investment purposes? It’s a good idea to find out from your mortgage professional what the interest cost will be on the funds you’ll be borrowing. This should be then factored into your projected margins.

– What will the total cost be? If you are in a mortgage term its best to find out how much the mortgage penalty will be to get out of your term early. We will also have to compare what you were paying for interest rate and what you’re going to be paying when you refinance.

– How much can I equity can I pull out of my home? In most cases, an appraisal will need to be completed. At most you’ll be able to refinance up to 80% of the value of your home.

When choosing a mortgage there are many things to consider with rate being at the forefront. The question is will the cheapest rate translate to savings in the future?

The answer is maybe but chances are probably not.

The majority of people sign a 5-year mortgage term but the average person only stays in that mortgage for 38 months. In many cases, the cheapest rate also offers the harshest mortgage penalties, restricted ability to bring your mortgage over to your brand new house and lower prepayment privileges. The difference between .10% on a $400,000 mortgage is about $20 a month. Typical low rate mortgages usually have a flat mortgage penalty if you break your term of 2.75%-3%. This means if you were to break your mortgage term at month 38 with a $400,000 balance it would cost you $11,000 – $12,000! Terrible! In the same scenario, a mortgage with a less harsh penalty would cost the consumer roughly $3,000. When you’re choosing a mortgage remember to get all the facts!

Another piece of advice is lenders are not like gas stations where virtually everywhere you go the price is the same. Make sure you do your homework with a variety different institutions which include big banks, credit unions and monoline’s to ensure you are getting the proper mortgage for the current you but also future you.

Thank you for allowing me to share my two cents!

Ben Bourgeois