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Surrounded By A Sea of Refinancing Confusion
There are probably many tips people have thrust upon or given you to “help” you determine the right time to refinance your home. You may have heard that the interest rate on the new loan must be at least two percent less than the old loan, or it's not a good decision. Another frequently quoted, but just as frequently incorrect statement, is that if your loan is less than two years old, you shouldn't refinance it now.
Neither one of these statements is entirely correct, and it can be extremely difficult to receive unbiased and accurate information about the refinancing decision and process. It is our desire to offer you a clear, concise guide to help rescue you from that sea of refinancing confusion. This report has been designed to provide unbiased information that will enable you make an educated decision about whether or not to refinance your home mortgage.
When Should I Refinance my Home Mortgage?
There are time when the decision to refinance a home can be made easily:
1. Divide the cost of the refinance by monthly savings generated as a result of the refinance, and compare the result to following the question: “How long will I live in this home?”. For example: if the cost of a refinance is $3,000 and you are saving $100 per month, then your Return on Investment is 30 months. If you are planning on living in the home for 35 months, you would “be ahead” $500.
2. If you are able to negotiate a true "no-cost" mortgage, where you don't pay closing costs of any kind and the new Note Rate is lower than your existing Note Rate.
3. If you need extra cash for debt consolidation, an auto loan or for any reason, and the mortgage rate is lower than alternative loan rates, then refinancing is probably the best choice.
What Refinancing Myths Do I Need to Watch Out For?
One widespread myth is the idea that lowered monthly payments are the financial yardstick that wise refinancing is measured by. Monthly payments are only comparable if they are based on the same loan duration! In fact, lowered monthly payments can be achieved even at a higher mortgage rate, if the new mortgage has a longer term than the remaining years of the old mortgage.
Another common misconception about refinancing is that if the new rate is not at least two points lower than your existing mortgage rate, then refinancing is not worth the time and trouble. In many cases, especially if you are planning to stay in your home at least three to five years, even a one point reduction may make an enormous difference in your overall mortgage cost.
Beware of the difference between a “No Cost“ loan and a “No Cash at Closing“ loan. The former is where you are charged $0 for closing costs. The later is where you are charged for some or all of the closing costs but they are added to the loan balance instead of being paid in cash at the closing.
What Exactly Do I Need To Consider
About Refinancing My Home?
To accurately sum up your refinancing decision, you need to thoroughly consider the following five factors:
1. The amount of reduction in the mortgage interest rate.
2. The amount of reduction in the monthly payment.
3. Any prepayment penalties on the old mortgage.
4. The amount of closing costs, including any points, loan origination fees, application fees, appraisal fees, title insurance, mortgage insurance, etc.
5. The number of years you plan on retaining your home.
What Will Actually Be Involved When I Refinance My Home Mortgage?
When you refinance, the proceeds from your new mortgage loan are used to pay off your old mortgage even if you use the same lender. You are not simply re-negotiating the terms of the old mortgage, such as reducing the interest rate.
You will receive back the old Note that you signed, the mortgage contract, and your lender will file a Mortgage Record Change. You will sign a new Note and mortgage contract which your new lender will record. No money will pass through your hands, unless you borrow more or less than your old mortgage balance. You may be required to pay points and closing costs unless you finance those along with the old mortgage balance.
You need to expect that your home will probably need to be re-appraised. Your credit history will be reviewed again, and there will be changes in your mortgage and title insurance.
Of course money doesn't just grow on trees, but if it is truly the right time for you to refinance, then with the money you will be saving you should begin to feel like your money trees are in full bloom!
What Should I Do If I'm Still Not Sure I Should Refinance My Home Mortgage?
If after reviewing this report you are still not sure whether or not you should refinance your home, then it is time to call on someone trained specifically to help you interpret your individual mortgage situation.
We Do This For You At No Cost or Obligation
David Wolsky is trained to take care of all those details for you. You can either visit with him at the office or discuss your situation on the phone. This consultation is absolutely free, and there is no obligation or salespeople to hound you.
Remember that refinancing your home mortgage does not need to be a tedious, overwhelming task. Click here to complete our contact form. Let us show you just how quick and hassle-free creating increased cash flow through your home mortgage refinance can be!
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