subject: Critical Factors In Determining If A Mortgage Refinancing Is Right For You! [print this page] There are several things to consider before making a decision. To save money, you must stay in your house longer than the "break-even period" to see any advantages of the refinance. When the lower interest rate has covered the cost to refinance, the "break even period" has been reached. As the difference between the interest rate of the refinance and the interest rate of the original mortgage grows, the "break even period" shrinks. Accordingly, the smaller the difference between the original rate and the refinanced rate, the longer the "break even period." When calculating the "break even period" start with the difference between the old mortgage payment and the new mortgage payment. Next, take the difference between the original payment and the new payment and divide it into the cost to refinance. The answer is the number of months it will take to refinance.
You must shop around for the best deal with a refinance as you did when applied for the original mortgage with the loan provider you currently have. Your final stop when shopping your loan should be your current loan provider. Your current provider will try to beat the competition to keep your business, making sure you get the best deal. To keep your business from going to a competitor, your current provider will work harder for you. Two advantages to using your current loan provider are the potential to reduce settlement costs, and the possibility of lowering your current interest rate without refinancing. You may not get the best deal or the best service going through your current loan provider because you are already a client. For this reason, your current loan provider should be the last one you approach.
If you are debating between repaying your loan in full or refinancing, think about refinancing first. The same percentage interest rate will be earned if you repay the loan instead. Take the benefits of refinancing into account if you don't plan to pay off your loan early.
When the primary goal is to take out cash, refinancing to lower costs is no longer the issue. When taking out cash, consider whether the cost to raise cash by using a cash-out refinance is higher or lower than the cost to raise cash with a second mortgage. Even if a cash-out refinance rate is lower than the rate on your existing loan, the cash out-out refinance may still be more costly than a second mortgage, even if the second mortgage rate is higher than the cash-out refinance. This happens because the second mortgage allows you to retain the lower interest rate on the current mortgage. These rules don't apply to every unique situation, so don't make decisions based on these generalities. Find out how they affect you.
by: Gen Wright
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