When does it pay to refinance my mortgage?

Asked by Gina

5 Answers

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Answered by Adam Witzburg, Mortgage Broker in Denver, CO
Gina,

There are a number of factors to consider when refinancing your loan. If you are currently paying any type of mortgage insurance and you think your property value may have gone up, it could be worth a look. Also, if your interest rate is roughly 1% higher than current rates, it could be worth a look as well. Each situation will be unique and the best way to decide would be to discuss your specific situation with a mortgage originator. I'd be happy to discuss with you over the phone, and there's no cost for us to run the numbers and calculate your potential savings.

| 11.13.13 @ 17:42
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$commenter.renderDisplayableName() — {comment} | 12.09.16 @ 13:39
Gina,

You will need to be a little more specific to get any detailed advice here. However, the benefits of the loan will need to outweigh the costs associated with the new loan. Determine what your goals are for the home and your mortgage; discuss these with a licensed loan originator. He/she will determine what loan products or strategies can help you achieve home finance goals. | 11.14.13 @ 22:04
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$commenter.renderDisplayableName() — {comment} | 12.09.16 @ 13:39
Answered by Ted Rood, Mortgage BrokerPRO+ in Maryland Heights, MO
It's all about a cost/benefit analysis for your particular loan, rather than a "refi if your rate drops by 1%" or other general "rule of thumb". It may not pay to refinance a $60,000 loan in Florida (a very high cost state for refinances), even if it's at 6%, given that the loan's costs could easily be several thousand dollars. By the same token, I am doing a loan in CA now for a client, dropping his rate by .5% on a 400K loan and giving him a lender credit for the closing costs. All his savings go into his pocket, so it's completely logical for him to refinance! | 02.02.15 @ 06:09
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$commenter.renderDisplayableName() — {comment} | 12.09.16 @ 13:39
Answered by Ray Blindauer, Mortgage Broker in Newport Beach, CA
In general, any time you can lower your interest rate with a lender credit to cover all closing costs, you should refinance. | 08.24.15 @ 17:13
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$commenter.renderDisplayableName() — {comment} | 12.09.16 @ 13:39
Good input above. To put the general cost/benefit aspect into a simple, concrete example: If your refi saves you $100/mo in cash and costs you $2400, that's a two year "break even" on the $2400 investment. That's good in my eyes but it's up to you to determine if that's good. Are you keeping the place at least two years? Do you have a better current use for the $2400? Can your lender decrease the $2400 with a higher rate and decrease your savings but also decrease the break even period?

Keep in mind that the cash savings is usually only part of the savings. In lowering your rate, you may also increase the amount going to principal. I say "may" because this depends on how far into your amortization you are, whether your principal is higher or lower than your original loan (you might be doing a cash out refi) and whether your current/new loan is amortizing or not. (Interest only deals are rare these days but sometimes are available / sensible. | 01.26.16 @ 17:42
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$commenter.renderDisplayableName() — {comment} | 12.09.16 @ 13:39
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