Question by sarah m: Refinancing Mortgage, any experts out there?
My husband and I are moving out of the country, we want to lower our payments for the next 3 years so we can rent our home out and not be burdened by such high payments. We currently have a 30 yr fixed at 6.5%. Our home is worth 360,000. Is it feasible to refinance after owning our home for only a year and a half and get a lower interest rate/lower payments? It’s our first home and we need professional advice. Who would we ask for real advice, we live in the DC Nova area and the market is in bad shape.
also, my parents live 5 minutes away so they would deal with my renters
Answer by Serge M
Call several mortgage brokers and ask them what rates they offer. Be careful, you may have offers for low interest rates on renewable rate mortgages, but these can quickly revert to much higher rates than you are paying now. However, such a mortgage might be feasible if the low initial rate is guaranteed for 3-5 years. You may be able to refinance to a fixed rate when you get back.
Also check on your current mortgage about pre payment penalties. If there is a pre payment penalty, refinancing may not be feasible.
The general rule is that you should refinance if the interest rate on the same term of mortgage is about 1 percentage point lower. That means you should get a 30 year fixed rate mortgage at 5.5 percent which is probably not possible today. To refinance, there are closing costs and possibly points, so you need at least that 1% lower rate to make up for the costs and still provide some savings in monthly payments.
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