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Retirement Planning: Time to Refinance? December 18, 2008

Posted by retirementwithaplan in retirement.
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The everyday financial decisions, no matter their size, have an affect on our retirement plan. The more we can save now, the more we can save for the future. perhaps we can find some hidden cash in our mortgage to use for our futures without adding to our debt.

That said, is it time to refinance that adjustable rate mortgage to a new fixed rate one? “It’s a call to action for homeowners looking to get out of adjustable-rate mortgages,” said Greg McBride, senior financial analyst at Bankrate.com. “Unfortunately, it’s not an equal-opportunity party.”
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It has long been assumed that the average mortgage rate of 6% allowed everyone to enter the market that was qualified to borrow the kind of sums needed to buy a house. And we have seen that this rate, as pivotal as it may have been, is the benchmark between how borrowers view the worthiness of a new loan. Is it good and not-so-good?

Rates have begun to fall as of this writing and there is some stirring in the housing markets at the news of rates below 5%. But not everyone will get this rate nor will everyone find it traveling down the same path.

Patty Mazzara, a mortgage broker in Minnesota was thrilled suggesting that “This is a whole new game now. Hopefully it’s going to give people some relief.”

To questions need to be asked: How do you get the best rate and where do you find it?

The path to a mortgage can vary widely and with good reason. Banks generally are interested in applicants that can meet much stricter criteria while brokers tend to search out deals from a wide variety of interested lenders. These are not subtle differences.

A broker may charge up to 1% more than traditional bankers but according to Asa Ghaffar, this may be not enough to sway a certain group of potential home buyers. Folks who might gravitate towards a broker would be those with adverse or bad credit, He points out that “the subprime mortgage market is a highly specialized area” adding that when borrowers use a broker, the cost offsets the brokers ability “to identify suitable lenders, comparing the higher cost structures to identify the most favorable deal.”

Banks tend to look the other way when approached by all but the most cash rich first time buyers. Ghaffar points out that a “lack of experience means that brokers help provide first time buyers with an invaluable borrowing lesson.” He believes that “a broker will explain the entire process to the borrower making it vastly easier to achieve a new, favorable deal in the future.” Add to this the borrower who is “lacking financial acumen”. These borrowers are generally susceptible to the first offer they receive, make costly mistakes, or simply are financially adverse to the tension such dealings bring.

The process of borrowing can be time consuming and those that are busy working often find the use of brokers the most advantageous use of their time. Even though they see the 1% as the cost of borrowing on a busy schedule, taking just an hour or two a week, may save them tens of thousands of dollars.Busy professionals. Should time be an issue, a broker can alleviate much of the work. It can take a lot of time to search through lenders, complete forms and chase outcomes of applications. This can all be taken care of for the busy borrower.

Either way, the best option for most borrowers, whether looking to refinance or buy for the first time is to look for fixed rate mortgage offers and opportunities.

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