Advice for buyers and sellers, from Justin Ruzicka

Refiance your Mortgage…or NOT?

We humans haven’t changed to much over the past 100 years and surely not much in the past Refinance your Mortgage today10 years.  We still want better homes for our children, we want our kids to attend better schools than we did, we want our lives to be ‘easier’ than it was for our parents and yet in all this we still don’t quite grasp finances.  Understanding finances and mortgages will make your life a lot easier.

What do we need to understand about finances if we are buying a home?  I think understanding mortgages, the costs associated with mortgages would be a fine place to start.    Lets start off from the perspective of a curretn home owner.  This is the family who has a great house, in a peaceful neighborhood with nothing bad about it.  They purchased their home  5 years ago for $175,000 with  5% interest rate, they were wise and had a 20% down payment, so they carry a loan of $140,000 with Payments of $ 750 Principle and Interest + $250 Taxes + $300 Insurance for a total of $1300 PITI, not to bad.  Currently they hear Mortgage Company’s saying: Refinance now, Take equity out of the home, go on vacation with the Equity in your home, Home Prices are up Mortgage Rates are low refinance today.   The home is located in a solid neighborhood with strong appreciation of 8%/year, over the past 5 years has increased value by 40%.  Making the home worth $245,000 and they only owe $138,000…Oh yeah the first 5 years those $750 monthly payments, less than 2% goes towards principle…sorry…you have over $100,000 of equity in your property…my advice DON’T FIX WHAT ISN”T BROKEN, dont refinance to go on vacation or buyer new car, or anything of the sort…

Enjoy your perceived wealth (more on that later) and keep on track to pay your mortgage off in under 30 years!!.  If you refinance today then you just threw out $45,000 of hard earned money.  Let’s do the math on that: 5 years or 60 months of mortgage payments at $750/mth = $45,000.  Which is probably equal to your yearly income.   Are you really that wealthy that you can throw out a years worth of income?  Is your $30,000 automobile worth $45,000 of wasted money?  GOSH that car now just costs you $75,000.  Yeah that is the math.   Math, for better or worse never lies..2+2 always = 4, the square root of 16 is 4…no way to argue with Math.  Do the math on your house, and 99 of our 100 times Refinancing is not a good option.

ps. leave a comment, write your thoughts ideas or suggestions, and tweet away.  🙂

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Justin Ruzicka, Realtor
Justin Ruzicka, RealtorThe House Guy
Much of my real estate career has been in buying, repairing, then selling the properties for a profit. I work for specific investment groups doing this, as well as manage a personal portfolio. The other 50% of my business is helping my neighbors, I have helped dozens of Families buy or sell their home.

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