A Refinance Calculator is your Secret Weapon
When a mortgage loan Rep tells you it's time to refinance reach for
your secret weapon, a refinance calculator!
When Should You Refinance?
Maybe you remember the old rule of thumb that your interest rate
should be 2% lower than the rate you have.
Well I think we all realized that this is no longer true.
See, before people began refinancing on a yearly basis they
really did not understand the process as well as the costs. Keeping
a mortgage was looked at as a long term thing; also, the
costs were higher years ago.
Now it is so competitive that the costs are pretty
streamlined or "bare bones". People are no longer accepting
processing fees and originating fees which were all pretty
common 10 15 years ago.
It is all about return on your money
If you can refinance and lower your payment that is a great thing;
however, you do have to realize that you are paying up front
money usually added to your loan to save money monthly or in
your monthly payment!
Plus you are possibly adding years back on to your
mortgage which means you will be paying a smaller payment back but
for more years.
It is not incredibly difficult to figure out if it is worth it,
but you do have to do some figuring to get an idea. You have to
figure out your "break even" point and then go from there.
A refinance calculator will tell you exactly that!
Let us consider a simple example: I have approximately 28 more
years to go on my mortgage, my rate is 7%, the loan balance is
$100,000 and my payment is $678.61. These are the key things you
must start off knowing.
If I refinance I will pay fees of $1,450.00 get a rate of 5.75%
and go back to 30 years and my payment will be $586.49.That
is a savings of $92.12 per month which is pretty good and after
16 months I will have recouped my $1,450.00 that I
spent.
As long as I stay in my house at least 16 months I will not really
lose.
How much will I save over the life of the loan?
For this you have figure out the savings over 360 payments
but factor back in the two more years you had to pay. Over
360 payments you will have saved $33,163.00; however you must
subtract the two extra years you will be paying which comes
to $14,075. This subtracted from the $33,163.00 leaves $19,088.00
which is the true savings.
Many lenders sell you on the low payment, while nearly
disregarding the rest of the equation. Make sure you know the full
financial picture before you refinance.
Hence, your secret weapon is a refinance calculator!
For help on figuring out if it is worth it for you to refinance
or not, use a good online mortgage refinancing
calculator.
Mortgage Refinance Calculator.
Related Refinancing Links
