Recalculating your debt

When is the right time to refinance?

Taking out a mortgage is a numbers game, and sometimes the numbers say you can save by refinancing. But when it comes to doing the math, refinancing is often as complicated as buying a home in the first place. So where do you begin? We talked to Marcy Boyd and Carolyn Washington of Old Valley Homes and Loans in Midtown, and they gave us some refinancing tips that should prove useful to any potential borrower—whether they’re mathematically challenged or Mensa material.

Make sure it makes a difference in your budget.
Don’t just refinance for the hell of it, or because you’ve heard chatter of lower interest rates. If you’re not going to recoup the cost of refinancing over the next 30 months, don’t do it, says Boyd. For example, you might reduce your mortgage payment by $100 a month, but if you’re planning to sell your house in a year, you won’t recoup the closing costs you paid to refinance.

Refinance before your adjustable rate mortgage (ARM) adjusts.
According to Boyd and Washington, these types of mortgages are always considered “temporary” and should be refinanced as soon as possible in most cases. “We like to contact our own clients several months before their rates will adjust so they can get into something else,” Washington says. By getting a head start, borrowers have time to improve their credit score, which may help them get better terms. Washington says borrowers who start the process four to six months in advance may be able to take advantage of dips in interest rates, too.

Beware direct mail promising low interest rates and monthly payments.
Do you want to reduce your $1,600 monthly mortgage payment to $300? Hell yes! But what’s that adage about something sounding too good to be true? In this case, say Boyd and Washington, it probably is. “These solicitations usually paint the best case scenario, and they sometimes combine the features of several different loan products to make it look like one loan,” Boyd cautions.

Understand what “no fee” really means.
“Most people don’t realize when they get a no-fee loan, they are getting a higher interest rate,” Boyd says. While nobody wants to pay significant up-front costs to refinance, they may be better off doing so to get a lower interest rate, depending on their individual circumstances. Which leads us to the last tip …

Work with someone you trust.
Refinancing a home loan is a major undertaking that is difficult to accomplish by phone or computer. A mortgage broker can help you find the best loan for your circumstances, or determine whether refinancing even makes sense for you. Boyd and Washington have both turned away potential clients because it wasn’t in their best interests to refinance at the time. “When looking for a broker, find someone who has a real concern for their clients and will spend the time to talk to you about your specific situation,” Washington says. “Also ask if they are licensed, which indicates there is a standard of behavior they have to live up to,” Boyd adds.

Old Valley Homes and Loans, 1315 18th Street, (916) 456-2299,