Should you refinance or buy a different home?

Real Estate

Should you refinance or buy a different home?

This is the question of the day.  I was speaking with a realtor the other day who has been in the business for over 40 years.  He said much of the same thing as all of the others who have been in it for over 30 years, “I have never seen a market like this!”  With one addition, “I have never seen a better opportunity for making a move in real estate with buying a home or doing a refinance.” 

So with that I ask which one is better in today’s market?  The answer is, both.  It really depends on your situation. When you pass by a sign that says "house for sale",  the 1st question I would ask you would be, How long do you plan on staying in your current home?  If your answer is 3 to 5 years I would encourage you to look at both options.  Refinancing right now you could get a 5/1 FHA arm that could save you hundreds of dollars a month and is currently about 1% to 1.5% below a 30 year conventional loan.  By the time it is set to adjust you will be making a move to a different property.  It is a win win.

One thing some homeowners fail to recognize until it's too late, is will the home-improvement I'm planning on doing push me out of the current neighborhood value? Meaning if you live in a neighborhood where the majority of the homes are selling for $250,000-$300,000, it's probably a bad move to put a $200,000 addition on even if the bank will give you the money. At that point perhaps you're better off looking for a home that already has the improvements you want to make. That way he will stay in the right pricing of a neighborhood and protect your equity.

If you are thinking you will move in less than 5 years consider a mover now.  Yes your home is probably not worth as much right now as it was a few years ago, however the rates are so good and the price of the homes you will be looking at could be even a better deal right now.  Not only can you move up and get a great buy on your dream home, you will probably not see your payment rise that much from what it is now.

If you think you will be staying put for more than 5 years, a 30 conventional loan can be very appealing.  Whatever your situation is currently it never hurts to look at how you can improve your current situation.