Question by beanie: Is it wise financially to refinance a mortgage?
My husband and I are considering refinancing, but I don’t really know how it all works, or even if it is a good idea. Will someone who actually knows, or has experience give me some info?
Answer by Stinker
If you have a high payment or a first and a second loan on your property it can be a good idea. Refinancing can get you a better rate and lower your monthly payment. Many people will purchase a home at a high rate and as soon as it closes will refinance it to a better rate. You can also get cash out on a refinance if there is equity in the property and you can use that money for home improvement or for paying off debt.
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You can get some general info there. There is also a calculator that may be able to help you at http://www.fivestarsmortgage.com/calc-should-refinance/.
Basically it depends on how much equity you have in your home, what your current rate and terms of your mortgage are, and what you want to refinance for.
I just helped a genetlemen refinance his home and he got 120,000 cashback. He can pay off all his other bills and start doing investments that he says will yeild him 90% return on his investement. For him refinancing his home changed his life.
You just need to look at the variables involved and crunch the numbers. If you have a general idea of your credit scores you can pretty much go to any mortgage broker and they can give you a pretty good idea of rates and closing costs to help you see if refinancing is a good choice for you.
Best of luck to you.
Refinancing a mortgage can be wise. It can save you money on monthly basis. The issue is you have to understand how you are getting that deal and if there are consequences to the refinancing. In the simplest case, a refinancing is taking a higher interest fixed rate mortgage and getting a new lower rate mortgage because interests have decreased. In some of the sketchier deals, the broker is selling you a complex product that temporarily lowers rate but increases risk later on (option ARMs and the like). If you don’t understand the product and the future consequences, don’t do it.
one shop loan
According to Clark Howard you should refinance if you can save at least 1 percent. If you will save less it may not be worth the hassle by the time they tack on closing costs to your new loan. Check out http://www.clarkhoward.com.
This is a very loaded question. There are alot of things that go into a mortgage. If you could get a lower rate and lower payments, then by all means, it may help. If you also need to take equity out of your house, thats a good idea as well. As far as the process, you could either A: refinace with the same company you are with now, or B: refinance with a Mortgage Broker (like myself) who deals with several companies and can shop around to get you the best rate. Just shoot me an email to email@example.com, and I’ll see what we can do!
It all depends on what you can really save by refinancing.
Refinancing typically costs $ 3000-5000 or more, depending on your loan amount, state, whether you pay points, etc…
You need to look at how long it will take to simply break even on the refinance. How much would you save monthly? Divide that into the closing costs you are paying, and you’ll see the number of months it will take just to break even. Anything longer than 3 years, you need to really think about it. Most people seem to refinance or sell every 5-7 years. How long will you keep your new loan? Long enough to break even? Long enough to actually save money?
Finding a good loan officer who will give you an honest opinion of your real savings can be hard. Too many will make the numbers look good on paper, just to make a commission, when you really are just going backwards.
So talk to a couple different brokers/bankers, and see what’s out there for you. You’ll get a few different opinions. Take them all home, sit down for a few days and think about it, and make your decision.
The main reasons borrowers refinance are:
1. Debt Consolidation. Maybe the most common because it makes the most sense. Again you are using the cheapest money (a first mortgage rate) to pay off the most expensive (credit cards) and other debts. There is no cheaper lending rate than a first mortgage rate.
2. Save Money. If the market rates are lower now than when you took out the loan or if your financial condition has changed enough to get you a better credit score then you may benefit for a refinance at a lower rate. Just making the change to a fixed rate loan will usually be cheaper than an ARM.
3. Get Cash Back. If the value of the home has risen enough this represents the cheapest money there is and can give you money to make home improvements, travel, etc. When applying simply request more than the existing loan and keep the difference.
Of course there can be other reasons but these are the most common. Once you’ve made the decision to refinance your work has just begun. Here is at least one thing to do before you sign the papers: Shop, Shop, Shop.
There are banks, mortgage banks, real estate company owned lenders, credit unions, Internet portal lenders ALL of whom want your business. They are all in business to make money-how? They do this by charging you as much as they can with or without your knowledge. Some institutions like banks are exempt from disclosing fees and charges required under RESPA (Real Estate Settlement Procedures Act)-so buyer beware.
Here’s a guarantee. If you fail to shop around and compare prices and fees and literally pit one lender against another bidding for your business at the very least you will never know if you got the best deal and worst case you probably didn’t get the best deal and paid thousands too much.
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There are three things to consider:
Current interest rate versus proposed interest rate: This is the real cost of the money over time. On $ 400,000, 1/2 a percent saves you $ 2000 per year.
The cost to get the new rate: Loans don’t do themselves. There are closing costs and points, and there is always a trade off between the rates that are available and the costs to get them. Loans exist all the way from true zero cost up to multiple points plus closing costs.
Once you know the one time cost and the ongoing benefits, you can compute a break even time. This brings us to the third thing to consider, which is
Length of time you’re likely to keep the loan. Most people only keep loans a comparatively short time. It’s actually way up from where it was a couple years ago, but the median mortgage is only about 28 months old. Of course, if it’s only fixed for two years, that’s a pretty good indicator that you’re not keeping it longer than that.
I strongly urge you not to consider lower payment as a justification for refinance unless it’s the only way to avoid bankruptcy or foreclosure. The games that unscrupulous loan providers can play with payment are legion.
It can be financially wise to even swap slightly lower payments on a soon-to-adjust ARM loan to get into a fixed mortgage. The one point rule doesn’t apply, as many loans done locally are done with no or low closing cost options. So here are a few scenarios where it makes sense to refi:
Going from ARM to fixed
lowering payment (without using interest only or longer repayment terms)
consolidating non-secured debt
receiving cash out (if you need to do so)
getting a no-cost loan AND lowering payment or loan term
Here is where it DOESN’T make sense:
Going to an ARM, option ARM, 50 yr., interest only (be wary of a loan that significantly lowers payments – you pay now or pay more later)
excessive closing costs negate new loan’s benefits
If you plan on moving soon, don’t refi
be careful if you have a pre-payment penalty in some states
If you have any more questions about a no cost mortgage, send me an email at: firstname.lastname@example.org
how much will it cost you?
how much will you save monthly?
can you do a 30 year fixed rate?
are you paying off other debts?