Question by McDonald D: Is it true that refinancing mortgage can decrease my monthly payments?
Best answer:
Answer by Rob
if ya do it right
Know better? Leave your own answer in the comments!
Question by McDonald D: Is it true that refinancing mortgage can decrease my monthly payments?
Best answer:
Answer by Rob
if ya do it right
Know better? Leave your own answer in the comments!
Yes, that’s the main reason for most refinancing. However, it does not mean that any mortgage can be refinanced to achieve that goal. It depends on the terms of your current mortgage and the terms of the mortgages available in the market. Refinancing is feasible only under the right conditions.
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If you refinance a lesser amount then your original balance.
Meaning, refinancing $ 50,000 when you are paying on an originally financed $ 80,000 mortgage.
And if the interest rate is the same or hopefully lower.
Meaning, your original $ 80,000 at 7% will now go to $ 50,000 at 7% or less. (6%, 5%, 4%, etc.)
And then only get a fixed interest rate. An adjustable rate can start out less but become more if the market rate goes high.
Meaning, a $ 50,000 mortgage at 6% adjustable could fluctuate to $ 50,000 at 9% or higher. This means that a payment of $ 450 could become $ 575 with short notice and there isn’t anything you can do about it. (This is one of the reasons foreclosures are on the rise)
A fixed rate will never change provided you don’t miss payments. This way you know what your rate and house payment will be 20 years from now, or throughout the life of the loan, no matter what happens to the market.
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If you refinance with a lower interest rate than you had before.
Of course, it is important to note that refinancing will cost you something: $ 3000 is a ballpark estimate.
So, you will have to save $ 3000 on your monthly payments ( the cost to refi’) before you start actually saving money.
For instance, if refinancing saves you $ 200 per month, it will take you 15 months of savings before you break-even with your refinancing costs.
Only then, after 15 months, do you ACTUALLY start to ‘save’ money.
Yes it is possible, it depends on what your current rate is, if you are going to take any cash out and what your credit score is. Don’t get tricked into a “Pick a Payment” or “Option Arm”. These loans are not meant to lower your total out go and many foreclosuere today are due to these types of loans that people did not understand. Try to go for at least a 7 yr fixed preferably a 30 yr.fixed. and try not to go interest only either. Your payment will jump radically after the fixed time is up. If you plan to keep the house for longer than 5 years, you might consider buy the rate down with points on the front. If you plan to refincace agian or sell. then try to put all you closing costs on the back which means a higher rate but in the long run it will be less out of your pocket.
yes and it adds to the length of the loan
Even though the rates are lowered by mortgage refinancing, this doesn’t mean that the monthly payments will be lowered. If you are not careful, you may end up with a higher monthly payment! Check out http://www.whataboutloans.com/mortgage/mortgage-refinance-loans.html for more information.