Refinance or buy new home - the questions to ask

There seems to be a crossroads that many homeowners reach after being in a home a few years: should you refinance your current mortgage or buy a new home?

If this is an issue you've been thinking about, your first task is to assess your current home. Does it still fit your needs? Will it fit your needs for the next 3-5 years? Are you planning for any financial events like children, college, retirement, job change? Do you still enjoy the location? How is the market in your area doing now?

Refinance

If you feel your current home will work for you for at least a 3 more years, stay put. If your financial situation needs some work, consider a refinance. It's especially important to refinance before you miss any payments or have a significant change in income or credit. A cash-out refinance which consolidates all your debt into your mortgage could free up a lot of cash. Or ask a mortgage professional about interest-only loans. You can weather a financial storm with an interest-only mortgage and pay on the principal when you’ve got the available money.

Purchase

If you anticipate any significant events in the next 3-5 years, think about the kind of home you’ll need. Do you need to downsize or upgrade? Tired of climbing the stairs in your 2-story home? Consider a ranch-style home. Hate the commute? Talk to a real estate agent about developing areas closer to where you work and play.

Do your research before putting your home on the market. How much will you net from the sale? An appraisal or comparative market analysis from a real estate agent can help you determine your home's value. How much will you put down on your new home? Talk to a mortgage professional about the available options for your new home and get fully approved for your new home before you start house hunting.

This common conundrum can be solved by assessing your goals and if your home fits in with them. After you do that, it will be much easier to determine if you should refinance or buy a new home.