Top Refinancing Tips At Any Age

If a refinance makes sense financially, it shouldn't matter whether you're in your 20s, your 40s or your 60s, right? Not always. Your age and life stage could dictate certain things about your financial plans, so let your refinancing decision follow suit.

Refinancing in your 20s

Younger homeowners tend to sell their homes more frequently, with first-time home buyers keeping their properties about four years, on average.

At this time in your life, milestones come thick and fast -- college graduation, marriage, kids, career changes -- and they often involve a change of address. So the older homeowner's fixed-rate mortgage may not be the best choice for you.

Why take on a 30-year fixed-rate mortgage when you can get a 5/1 hybrid adjustable rate mortgage (ARM) and save a full percentage point on the interest rate? The 5/1 hybrid ARM gets you a fixed interest rate for the first five years. After that, the mortgage rate adjusts each year -- but chances are you will have sold and moved by the time that happens.

How much can you save by shaving off a percentage point?

• On a $350,000 mortgage, getting a 5/1 hybrid ARM at 3.5 percent (fixed for five years) instead of a traditional 30-year fixed-rate mortgage at 4.5 percent saves you $201 a month.
• Over five years, that's a difference of over $12,000 in payments. With that, you could pay down your student loans, buy a car or add a nice chunk of change to your savings account.

Refinancing in your 40s

Midlife crisis? No way! By now, you are in your peak earning years. Most likely, you have some investments and a solid credit rating, and you plan to keep your home for some time. You'll also be planning for retirement, and your expenses will be dropping later as your kids exit college or move out.

While it may be tempting, cash-out refinancing to get a boat or sports car is probably not the best use of your home equity. However, a timely refinance could help you unload your mortgage before you retire.

If you want the best mortgage rates, choosing a 15-year mortgage generally gets you an interest rate about 0.5 percent lower than that of a 30-year mortgage. Your total interest over the life of the mortgage can be hundreds of thousands less. Imagine what that would do for your post-retirement lifestyle!

Refinancing in your 60s

Should retirees have mortgages? It depends on who you ask. While many people are uneasy about having a mortgage obligation after retirement, many financial planners advise that it is risky to have all of your investment money in real estate or any single investment type.

Diversifying your holdings by trading home equity for other investments could be smart, and increasingly more common. In 1992, only 18 percent of homeowners aged 64 to 74 still had a mortgage obligation. By 2007, that figure had increased to 43 percent.

Refinancing and home equity borrowing have created or extended payments where none existed before. If your portfolio is down thanks to the recession, you may want to tap your home equity and put some cash back in the market while stock prices are low. Ask a trusted financial pro whether this strategy makes sense for you.

Finally, if you have amassed a good deal of home equity but are short on cash flow, look into reverse mortgages. Reverse mortgages are complicated, and they aren't for everyone. However, they can provide money that would allow you to keep a home you love while improving your lifestyle.

Talk with experienced refinance mortgage lenders

Houses come in all shapes and sizes to meet the needs of committed careerists, and happy honeymooners, burgeoning families and empty-nesters -- and so do home loans. Consult with refinance mortgage lenders and compare home loans to determine the right fit for your lifestyle and financial goals.