Refinancing Your Mortgage
Refinancing your mortgage can help lower your monthly payment, pay off bills and manage your debt. If interest rates have gone down from the rate you are currently paying on your mortgage, it might be a good idea to refinance. For a free consultation to see if you might benefit from a refinance, feel free to CONTACT US and we will review your situation.
The truth is, few thing in life can compare to the fun filled adventure that is refinancing your mortgage. Wait, what did I just say? That doesn’t seem quite right.
The truth is, dealing with a refinance can be quite the arduous process, and for the most part, it’s not fun at all. This can be attributed to the abundance of paperwork to fill out, the random lender fees, and the sheer fact that most people don’t like modifying their mortgage to begin with. But there is a reason so many people subject themselves to these hardships, and there are times when refinancing your mortgage is an extremely smart decision that can save you thousands of dollars over the life of your loan.
You may have heard on the news that interest rates have been hovering around historic lows lately, and because of this, thousands of homeowners have refinanced their mortgage in order to cut their monthly payment. You might be wondering how this works. Basically, by replacing (refinancing) your old mortgage with a new one (that offers a lower interest rate), you can possibly save hundreds of dollars per month. Imagine if your monthly mortgage went from $1500 a month to $1200. Wouldn’t it be nice?
In fact, lowering your monthly payment may not be the only situation where a refinance would benefit you. You would also want to consider this if the mortgage you are in is (the dreaded) adjustable rate mortgage. If you find yourself in this situation, and interest rates are expected to rise, it would be extremely smart to lock yourself in a lower, fixed rate that will keep you sleeping soundly no matter how high rates may sail. And let me tell you, the sky is the limit.
Another reason a person may be interested in refinancing their mortgage is so they can take cash out of the equity they built up over the years. Instead of just refinancing for the amount they currently owe, they may pull out additional funds to use for improvements on their house, starting a new business, or even putting their kids through college.
Of course though, just like everything else, refinancing a mortgage is not free. It would be nice if it was, but that’s just not the case. While you might catch a break and your lender may help out with some of the charges, it is extremely likely that you will still be looking at several thousand dollars in closing costs to pay for a quality refinance. Obviously you must consider these closing costs when deciding whether or not to follow through with the refinance. The trick is figuring out how long it will take before the lower monthly payments make up for the added fees and closing costs. We call this the “break even” point. Once this point is met, each month afterward you start seeing the extra cash in your pocket.
The biggest thing to consider in regards to this (if you’re doing the refi to save money) is how long you plan on living in the house, and the difference between your old rate and the new one. Long story short, the bigger the difference in rate and the longer you plan on living there, the quicker you start saving moolah! Wahoo!
To find out if doing a refinance would be cost effective for you, you need to find out what the break even point would be for your mortgage. To figure this, simply divide the amount of closing costs by the amount of monthly savings. For example, if you are saving $300 a month, and your closing costs are $5000, just do the math:
$5000 / $300 = 16.67
Meaning that after a year and 4 months (approximately) you would start seeing the savings. So if you are planning on living in your house longer than this, a refinance would be beneficial to you!
As always, if you have any questions or comments, or if you are interested in a refinance yourself (and you don’t feel like doing any math), don’t hesitate to CONTACT US. We will evaluate your current situation and let you know if a refinance might work!
- Pate
15 Comments for this entry
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Useful info, nice blog, thanks.
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What wonderful words
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Hello from Russia)
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Dear Author http://www.dfwmortgageguide.com !
It is not necessary to try all successively -
Hi there I like your post
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Here’s a comment. Great advice =) Thanks
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Thats some great basics there, already know some of that, but you can always learn . I doubt a “kid” could put together such information as dolphin278 suggested. Maybe he’s just attempting to be “controversial? lol
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You made some good points there. I did a search on the topic and found most people will agree with your blog.
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Interesting , how do I make use of this?
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Terry
June 3rd, 2010 on 12:21 pmFINALLY! Someone has taken the time to make something as difficult and tedious as a re-fi easy to understand–and in English too!
Just the advise me and wife have been looking for.
Thanks, Terry
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outstanding post! great advice, will take on board!
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Thanks!
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Hey we was just looking thru your page on my Garmin Phone and I was thinking about how well it will work on the new ipad thats coming out. Fleeting thought…. Anyway thanks!
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