Do any of these situations apply to you?

• The holidays are over; your bonus spent; and your credit card limits are maxed.

• You want to renovate your home, but can’t find the extra cash.

• The economy looks like it’s slowing down, and your boss says, "no raises".

If any one or more of these situations apply, can you do anything about it? Well, if you own your own home, the answer may be right in the brick and mortar of your home. Four times since January, the Federal Reserve cut the key inter-bank interest rate. These are the first rate reductions in two years and the largest decrease in the rate in almost eight years. What does this mean to you? Well, according to Peter Gilbert of Alta Financial, Inc., a mortgage lender based in Voorhees, New Jersey, "assuming your $200,000.00 mortgage currently carries a 10% rate, by refinancing to a 7% rate, you stand to save approximately $425.00 per month or $51,000.00 over ten years. On the same loan with an existing rate of 9%, the savings realized would be close to $280.00 per month or $33,600.00 over ten years."

The schedule at the end of this article indicates the difference in monthly payments. It’s broken into 20 and 30 year loan periods and indicates your monthly payments for particular loan amounts. For example, if you have a 20 year loan for $10,000.00 at 9.5% rate your monthly payment would be $93.22. The same amount lent for the same period at 7%, has a monthly payment of $77.53 per month. With this schedule, you should be able to estimate what your payments could be at a new lower rate. Savings like that means your budget stretches. The credit card bills get paid off, your home can be renovated or you can redirect the money that is no longer spent on your mortgage to retirement or to savings. Now is the time to consider refinancing your existing mortgage!

To determine whether refinancing makes sense for you, you should: 1) review your financial situation, and 2) decide if you will be staying in your existing home long enough to recover the costs associated with refinancing. As a general rule, you should refinance only if the savings realized from the reduced monthly mortgage payment exceed the costs associated with closing on your new loan for the period you remain on the property. What costs? The lender may charge an application fee, a loan origination fee, discount points, and require you to purchase another title insurance policy. You will also incur attorney fees to perform the title work, to ensure the accuracy of mortgage and credit card payoffs, and to distribute the funds. These costs should be prorated over the life of the new loan to see if the savings cover these costs.

Contact your existing mortgage company to see what rates they offer. Generally, Lenders prefer to refinance the loan of an existing customer than risk losing business to a competitor. Shop around! Mortgages are like any other product, you have to find the deal that is good for you. Be sure to ask for the Federal Truth-in-Lending and Good Faith Estimate of Settlement Costs disclosure statements. By law, these must be provided, but asking for them identifies you as a knowledgeable consumer. These statements will assist in determining whether to refinance. Next contact an attorney to see wheat he or she may need to do in order to close the loan.

Lenders look at many factors. The most important of these factors are your credit history and credit scoring. These are generally obtained through your credit report. The Lender will look at the property value, your debt to income ratio and housing expenses.

Welcome to the real world! Very few people have a high credit history score. Nevertheless, you may still be eligible for a loan. Just because one or several lenders may not be willing to loan you money, does not mean that all financial institutions will not lend you money. Some financial institutions have programs that will help you rebuild your credit while taking advantage of lower interest rates. Some alternatives may be an adjustable rate, or a fixed rate that is higher than prime, but less than your current rate.

Nothing is worse than finding out you could have taken advantage of a great opportunity but did not. The window of opportunity for new rates will probably be for a limited time. Don’t be fooled by thinking you should wait until the rate drops further. No one can really say how low the rates may drop.

Give Mattleman, Weinroth & Miller a call and we will be happy to help you understand the process and point you in the right direction!