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5 Things to Consider When Refinancing Your Mortgage as a Young Professional

Mortgage Money Refinancing HouseWith mortgage rates hitting new lows almost every other week, many young professionals who recently purchased condos or homes in the recession-induced buyers market are trying to weigh their options for refinancing.  I recently went through the process to refinance and came across a number of things to consider if you are trying to make a decision.

5 Things to Consider When Refinancing

1.  Are you really saving money?  Many mortgage companies will dangle low payments in front of you but, when you dig deeper all they are doing is extend your loan and you are actually paying more in interest throughout the new, longer loan.  For a great breakdown of this with examples, check out Mortgage Refinance and Resetting the Clock by a blogger from The Finance Buff.

2. Can you make more of a principle payment and get rid of Private Mortgage Insurance (PMI)?  Many first time buyers do not put the full 20% down on their mortgages and end up paying over $100 a month in PMI.  Getting rid of PMI can take many years and even then can cost $400 for a new assement and to prove youc an drop it.  If you you can put down some extra principle to get your Loan to Value under 80% you can get two birds with one stone, lower your rate and get rid of PMI.

3. Are you really getting the best deal?  Make sure your lender isn’t playing games by offering you a low rate with lots of refinancing fees.  Sometimes the fees make up the difference in rates.  Use the comparison tools and calculators at sites like to avoid this.

4. Do you have enought saved up?  Be sure to fully read and understand the documents and quotes the lenders send you.  Often times you need even more than they say because in some cases you need to pay an extra months payment ahead of time on top of title insurance, lenders fees and other fees.  Have everything you need ready and liquid for the transaction.

5. Are you staying in your condo or house long enough to realize the benefits? Young professionals tend to move around more than most.  It’s easy get excited about the prospect of lower payements and saving money but, keep in mind you can realize the savings of refinancing unless you stay in your place for awhile after you refi.  Basically you need to understand how long you will stay in your place, how much you save per month and how much your refi will cost and then you can divide the cost by how much you save each month to see how long you need to stay to make the refi worth it.  If you don’t like doing the math yourself you can use this refinance calculator.

Have you recently refinanced and run in to other areas to focus on?  Drop us a comment below!

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  1. Does anyone really want to be refinancing right now? The NY Times just had a great article on how everyone is sitting out the rebound and renting instead.

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