Is refinancing worth your time and money?

September 27, 1992|By Carla Lazzareschi | Carla Lazzareschi,Los Angeles Times

Q: I need more cash, and I want to lower the interest rate on my home mortgage. Should I refinance my mortgage or take out a second trust deed -- or even get a home equity loan? My goal is to repay the money I need quickly, so I can cut my monthly payments. -- J. P.

A: How much money do you need? If it is a small amount, refinancing the mortgage may cost you more than it is worth; most refinancings carry fees and points totaling at least $2,000.

But if your mortgage rate is 10 percent or more, you might consider a refinancing, because current rates on 30-year fixed mortgages are about 8 percent.

Another consideration should be your need for cash. This will increase your loan balance and your monthly payments, possibly offsetting any gain you get.

Because you intend to repay the amount as soon as possible, you should try to get your lender to recalibrate your loan entirely -- at no more cost to you -- once you repay the money. By doing so, you can get a lower interest rate, satisfy your immediate need for cash and set the stage for a lower monthly mortgage payment once the additional loan is repaid.

Q: If a parent lists a child as a joint owner of a personal residence, is the child entitled to use the $125,000 profit exclusion when the home is sold? -- K. B. H.

A: To use this one-time exclusion, a person must be at least 55 and have owned and occupied the home for three of the last five years. If a parent simply puts a child's name on the title, the child could not use the exclusion upon the home's sale.

Q: I recently purchased a fixer-upper home for $15,000 that I will use for my retirement in six years. I was being shipped overseas at the time and couldn't wait around to get a regular mortgage, so I financed the purchase through my credit union at 15 percent for five years. Now I would like to refinance the home and get a conventional mortgage. How can I complete the refinancing from my overseas assignment? -- E. J. L.

A: Select someone to represent your interests while you are abroad. Then execute a power of attorney authorizing him or her to act on your behalf in signing loan documents and other papers.

(Carla Lazzareschi will respond in this column to questions of general interest. Please do not telephone. Write to Your Money-Money Talk, Business Section, Los Angeles Times, Times Mirror Square, Los Angeles, Calif. 90053.)

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