Mortgage Loan Refinancing
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Is it Time to Refinance my Home Mortgage Loan?
We constantly hear people talking about refinancing their homes. Saving money always sounds good, so how do you know when it is time to refinance? Of course, every situation is unique, but the evaluation criteria should be basically the same.
If your original mortgage loan was set up to include no out-of-pocket expenses to refinance, you only need the mortgage loan rates to drop about a quarter of a percent to make the refinance worthwhile to you and your lender. If you have no such agreement, you may be able to negotiate away some of the costs with a lender who wants your business. To avoid having to add any cash to the deal, you may choose to roll the charges into the loan. In many cases, even after tacking on any refinance charges to the loan, a person can still end up with a smaller payment based on the lower interest rate.
You will also need to consider how long you play to stay in your house. If you plan on living in the house for at least 3 to 5 years, it may make sense to pay some points at closing to get the very best rate available. The payback on buying the points usually occurs in the first 3 to 5 years of the loan. There are many online calculators that can help you determine how long it would take to recoup the up-front investment and help you choose the best use of your money. Make sure that you understand the tax implications of your refinancing before finalizing your approach to ensure that there will be no surprises later.
We constantly hear people talking about refinancing their homes. Saving money always sounds good, so how do you know when it is time to refinance? Of course, every situation is unique, but the evaluation criteria should be basically the same.
If your original mortgage loan was set up to include no out-of-pocket expenses to refinance, you only need the mortgage loan rates to drop about a quarter of a percent to make the refinance worthwhile to you and your lender. If you have no such agreement, you may be able to negotiate away some of the costs with a lender who wants your business. To avoid having to add any cash to the deal, you may choose to roll the charges into the loan. In many cases, even after tacking on any refinance charges to the loan, a person can still end up with a smaller payment based on the lower interest rate.
You will also need to consider how long you play to stay in your house. If you plan on living in the house for at least 3 to 5 years, it may make sense to pay some points at closing to get the very best rate available. The payback on buying the points usually occurs in the first 3 to 5 years of the loan. There are many online calculators that can help you determine how long it would take to recoup the up-front investment and help you choose the best use of your money. Make sure that you understand the tax implications of your refinancing before finalizing your approach to ensure that there will be no surprises later.