Question by kik3_07: What happens when you refinance your mortgage?
So this is the thing, I’m taking over my dads mortgage payment.
He just retired, and I want to take the stress out of him of having to worry about making payment and all that.
I’m 23 years old, so I’m somewhat unexperienced about all this real estate, loans, etc stuff.
We’ve been living here since 1997, but my dad refinance twice already. The last time in 2006.
So that’s my question. What happens when you refinance?
According to my dad he says that everything we had paid before refinancing our home is gone? Is this true? Basically, he says, is like starting from zero?
I understand the purpose of refinancing, like to lower your interest rate, change the loan time, etc.
But I’m confuse about what happens to everything you have paid already prior to refinancing…
Answer by Rob
1 you can NOT refi.
#2 Dad can and should refi since rates are
#3 u need money to refi or roll it into loan.
#4 all dad paid b4 is principal (not gone)
and interest (all ways gone)
#5 the money saved is from a lower rate.
#6 the house Must reappraised b4 refi .
#7 you want to read these
House buying kit for dummies, Tynsen.
Total money make over,Dave Ramsey
to learn from others dumb mistakes , not
#8 Dad must have an income to refi.
good knowledge is good luck.
What do you think? Answer below!
your dad misunderstands some of it
Yes you start over again, but only on the number of years you have to pay off the loan. in 2006 he refinanced (I assume with a 30 year mortgage). So as of today, there are only 24 years left on the mortgage. And if you refinance today, the clock is reset with a 30 year loan.
However, each month you pay down the principle of the loan and this is not lost. Lets say in 2006 the loan was 100,000. 6 years later the balance owed is 97,000. If you refinanced today, the new loan would be 97000. Nothing was lost.
And if you ask why only 3000 was paid off in 6 years, the answer is that most of the payment in the beginning is interest and very little is principle. Plus 3000 is a guess.
It is very obvious that you have no idea how loans work. Payments are not “lost”. Those payments were applied to the loan and paid the interest that accrued along with paying down the principal.
Of course, your father may have one of those interest only mortgages. In that case, the payment just goes to pay the interest and nothing goes to the principal.
Refinancing means you refinance the original loan, normally to get a lower interest rate OR to take equity (money) out of the house, OR both. The original loan amount is not truly “gone”. They will charge and add on to this loan for the refinancing, which they call “points”. This will be added to your original loan balance. Also if you take money out of the value of the home (equity), this amount will also be added to the original loan balance.
For example: Say your original loan is for $ 200,000.00. And it costs you $ 4,000.00 to refinance. That takes your mortgage amount balance to $ 204,000.00. Then say you take $ 10,000.00 equity out of your home, that would be added to the $ 204,000.00, bringing your new mortgage total to $ 214,000.00. Your monthly payment could go up or down, depending on what interest rate you get. But your new payment is based on the $ 214,000.00 as that is the amount owed on the mortgage. Of course if you did not take equity out of the home, then your balance on the mortgage would be $ 204,000.00.
Hope I explained that clearly. It’s really not too difficult.