Mortgage Refinance
Home Loan
Does Refinancing
Really Save You Money?
Does refinancing to a new
lower interest rate or a shorter loan term save you money?
Lower interest rates mean lower monthly payments - If
rates are lower since you took out your mortgage,
refinancing may get you a lower interest rate. Monthly
payments go down due to the combination of lower interest
rate and new term of the loan.
Will refinancing "REALLY LOWER" save you money? That
depends on the time you expect to live in the respective
home and the cost of refinancing. The key question lies on
how long does the newer loan amount take to provide you a
break even point between the old mortgage dollar and the
new lower refinanced dollar amount.
Example:
Monthly Mortgage Amount: $1,200
Refinancing Cost $2,400
New Monthly Mortgage: $1,100
Monthly Savings $100
Breakeven Point $ 2,400 / 100 = 24 Months
Refinancing a fixed-rate
mortgage - If you plan to stay in your home for the
long term and never want to worry about rising interest
rates, replacing your ARM with a fixed-rate mortgage may
be a smart move. With an interest rate that never changes,
a fixed-rate loan gives you predictable payments
throughout the loan term.
Refinancing an Adjustable Rate Mortgage with another
ARM - Are you planning to move within the next several
years, you may want to consider replacing your current ARM
with a new one. In most cases an ARM will start off with a
lower interest rate than what you’d get on a fixed-rate
loan, and that rate can stay fixed for anywhere from three
months to 10 years. Depending on how long you intend to
stay in your home, you can choose an ARM that isn’t
scheduled to adjust until after you plan to move.
Are you looking to lower
your monthly payments across all your loans/debt? A
step in that direction is done by considering to refinance
your mortgage. There are two basic ways to accomplish
this.
1) Switch from a fixed-rate mortgage, in
which the interest rate you pay doesn’t change from year
to year, to an adjustable-rate loan (ARM), in which the
interest rate your pay to depends on the market; or you
may do the reverse and switch from adjustable to
fixed-rate payments.
2) Cashout refinance, in which your pay off
all of your old loans and take out new ones. Why does this
make sense? Over time, the interest you pay on the
original loan gets compounded, meaning that you start to
pay interest on the interest you owe.
New loans provide a fresh start. When lenders consider
your refinancing application, they look at factors like
current balance, monthly payment and the remaining number
of monthly payments over time to determine how best to
work together with you
