If you’re considering refinancing your home, you’re not alone. Some homeowners are scrambling to beat a pending mortgage reset while others are simply wanting to find a better deal. A third group is even looking to consolidate some debt and are thinking of a new mortgage, an equity loan, or a equity line of credit to wipe out other expenses.

Tempting as it is to make a quick decision about home refinancing, it is always best to do your homework and weigh your options first. That mailing from a national mortgage lender, the email from a local broker, or the pop-up you got when visiting a personal finance site may be enticing, but better deals could be available to you.

Two key components should be considered when evaluating any refinance offer:

• What will your costs be to refinance?

• How much will you save each month by refinancing?

Some homeowners have been shocked to learn just prior to closing that they are responsible for thousands of dollars in closing fees, money that could be best used for reducing their debt.

If you can refinance for free, then the first question doesn’t apply. However, “free” may exclude some charges including title insurance, application fee, and related expenses.

Other things to consider when calculating your costs are:

• How big is your current mortgage? If you can’t handle the higher costs of a mortgage reset, then refinancing is the way to go.

• How long do you plan on staying in your home? If for just a year or two, then refinancing may not make sense. However, if you see yourself living in your home for at least the next five years, then you should recoup the costs related to refinancing.

Keep in mind that rolling your personal debt into a loan could be helpful, but it will add to the cost of your mortgage and add in an additional monthly expense in the form of an equity loan/line of credit payment.

Finally, keep tabs on the current financing trends. If rates are trending downwards, waiting to refinance could save you additional monies, perhaps enough cash to help you tackle your other debts separately.

Tags: equity line of credit, equity loan, home refinancing, mortgage, mortgage reset, refinance, second mortage

This article is the first in a series of occasional articles discussing the purchase of a second home whether for vacation or investment purposes.

If you are in the market for a second home, you know — that beach or mountain house you always wanted — 2008 is shaping up to be a very good year for you to make your move.

Although some homeowners are finding it difficult to even keep up with their monthly payments, a significant number of consumers are looking at expanding their real estate holdings by purchasing another home.

Home Prices Have Declined

What is fueling the demand for second homes? Answer: the recent decline in home values has suddenly made buying a home at the shore much more affordable.

In the April 2008 issue of Money magazine, Your Money & Your Life columnist Jean Chatzy shared her desire to buy a home on Long Beach Island, New Jersey. This popular summer beach destination has seen home prices increase by as much as 25% annually until last year when the market reversed course, sending prices down by 13%.

Know Your Housing Market

Of course, the drop in prices in one vacation market doesn’t translate into an across-the-board decrease everywhere else. If you are searching for a bargain, then you’ll need to do your homework before investing:

• Obtain real estate comps (comparables) for homes in your desired market. A knowledgeable real estate agent can get this information to you and provide valuable information about local market trends.

• Read up on the area that interests you. Let’s say that you want to buy a home in Kure Beach, NC. Google the town and find articles discussing the town’s future, taxes, building rights, etc. Visit the town’s website for additional town news.

• Visit again and again. You may like a certain community in the summer, but not in the off-season. If you plan on spending time at your second home in the winter months, will there be enough for you to do to avoid boredom?

• Talk with a mortgage lender. You may be in terrific shape financially, more than able to meet your current obligations, with plenty of cash left over. Visit a mortgage broker now to see just how much home you can afford — financing rates for second homes have dropped in recent months.

Shop Around For Your Second Home

Finally, if you have decided that a second home is right for you, then shop around. With home values down in many areas, you could shave tens of thousands of dollars off of the asking price for some homes that an owner all to willing to quit. Your mortgage pre-qualification letter will come in handy at this time, just the right tool to help you make your best deal in 2008.

Resources

Buying A Home

Home Purchase Loans

Mortgage 101

Tags: beach home, beach house, mountain property, refinance, second home, shore property

If you are planning to refinance your home, get your first mortgage, or apply for any other type of consumer credit, your housing and debt-income ratios will be tightly scrutinized by lenders. In brief, these ratios will determine if you can afford to repay your loan.

The housing ratio is calculated by dividing monthly housing expenses by your gross monthly income. As a basic rule, the housing ratio should not exceed 28%. These expenses include: mortgage payment, home insurance, association fees, private mortgage insurance, and any other charges you are required to pay back on a monthly basis. Your income can include the following: wages from job, interest income, alimony, social security or other government pay out, and a variety of other income producing sources.

The debt-to-income ratio is calculated by dividing your fixed monthly expenses by your gross monthly income. As a basic rule, the debt ratio should not exceed 36%. Your fixed monthly expenses include: monthly installment loans, housing expenses, monthly revolving loan payments, alimony/child support, legal obligations, and more.

Before applying for a mortgage, experts strongly encourage you to obtain copies of your credit reports to make sure that they are free of erroneous or outdated information. These reports weigh heavily in determining creditworthiness and validating your lending ratios.

Both ratios are used to determine what you can borrow after your down payment amount has been taken into consideration. Use this loan-to-value (LTV) calculator to determine what your down payment amount should be.

Tags: debt-income ratio, housing ratio, mortgage lender, mortgage qualify, refinance