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Refinance Considerations
Thinking of refinancing? Contrary to popular belief, a two
point reduction in your rate is not the only time a refinance will
make sense. Did you know that even a small decrease can pay off
quickly if you find a mortgage company who will waive the usual
refinancing charges? Eliminating application, appraisal and legal fees
can save you anywhere from $1,500 to $3,000 and up, as long as you
are willing to pay what will usually be a slightly higher
rate.
To get a quick estimate of the time it will take to recoup the
costs of refinancing, divide closing costs by the monthly
savings. This amount will depend factors such as total
refinancing costs, if you decide to sell your home in the near
future and taxes.
As you consider refinancing your present mortgage, here are a few points to keep in mind:
- Will refinancing to a shorter loan term with a higher monthly
payment. balance out the benefit of building up equity
faster? A fifteen-year mortgage will save you a
significant amount of total interest payments over the life of
the loan but if you can't afford the higher payments for a
15-year mortgage, the next best way to build equity is to ask
for a new loan term that matches the years remaining on your old
loan.
- Always get a written statement that guarantees the interest
rate and the number of discount points you are expected and are
willing to pay at closing. This "lock-in" protects you
against any rate increase prior to loan closing.
- What if you could get some extra cash back? If you have
enough equity in your home, you may be able to borrow an amount
over what you owe and use the extra money to pay bills, enjoy
life, or consolidate high-interest loans into your next home
loan.
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