Should You Refinance Your Mortgage Now?
September 26, 2009 by Tucker
Many homeowners are considering taking advantage of today’s historically low interest rates by refinancing their mortgage. In many cases, they are able to save hundreds of dollars per month by refinancing. Whether mortgage refinancing makes sense for you can be easily determined by doing some simple math.
The first consideration is how much lower your new interest rate should be than your current rate. There is a common belief that if current rates are more than 1.5 to 2 percentage points lower than your current rate, then you should refinance. That’s a good starting point, but there is more to the story than just the raw interest rate.
Your real concern should be the total cost of the mortgage refinance both in the short term and the long term. The total cost includes not only the monthly mortgage payment (principal plus interest), but the closing costs, as well. Closing costs typically include such things as:
- Appraisal fee
- Credit Report fee
- Processing fee
- Commitment fee
- Tax Service fee
- Flood Certification fee
- Discount points (if any)
- Title Insurance (based on mortgage amount)
- Recording/Notary fee
- Per diem Interest
- Real Estate Taxes
- Home Insurance (percentage of mortgage amount)
Adding all these up can easily run into several thousand dollars, even without discount points. This is money that must be paid at the loan closing. In the case of a mortgage refinancing, lenders often advertise “no closing costs”, which is a bit misleading. The truth is that there ARE closing costs, but they are paid out of the proceeds of the loan rather than the pocket of the homeowner. This is possible when the homeowner borrows against the equity in their home as part of the refinancing.
As an example, let’s say that your home is worth $175,000. Your original mortgage was for $125,000 over 30 years at 7% interest. You still owe $100,000 on the original mortgage. The closing costs for your refinance are $3,000. If you simply refinance the $100,000 amount at a lower interest rate you will reduce your monthly payments, but you will have to pay the $3,000 closing costs out of your own pocket. If you choose the “no closing costs” option, your $3,000 closing costs will be paid by simply borrowing the additional money against the equity in your home (i.e. the value of your home less the amount owed). Your mortgage will now be for $103,000 instead of $100,000.
So, what about that widely held 2 percentage points belief we mentioned earlier? The monthly payment for a 30-year $125,000 mortgage at 7% interest is $831.63. For your new 30-year $100,000 loan at 5% interest, the monthly payment is $536.82, a savings of almost $300 per month. If the new mortgage is $103,000, the monthly payment is $552.93, still saving you over $275 per month. In this scenario, considering only the monthly savings, you would recoup your closing costs in as little as 10 months.
Sounds great, right? Well, there’s another factor you need to consider. If your original mortgage was $125,000, you’ve been paying on it for 152 months to get the principal balance down to $100,000. Therefore, you have 208 months left before the mortgage is paid off under the original terms. If you continue without refinancing, you’ll pay an additional $172,978 (208 months at $831.63 per month).
If you refinance your mortgage for the $100,000 you currently owe, you’ll pay on it for 360 months at $536.82 plus the $3,000 closing costs for a total of $196,255.
$172,978 <– payout without refinancing
-196,255 <– payout after refinancing
-$23,277 <– difference
In this case, by refinancing you will end up paying an additional $23,277 for the new loan over the original mortgage. This works out to about $775 per year, which may be acceptable to you in order to have the lower monthly payment now. You are the only one who can make that decision based on your personal financial situation. The important thing when refinancing your mortgage is to consider all the ramifications.
This is another of today’s money secrets that can help you get the most for your money in today’s lending market!
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Good point – Fighting Hard -. Many large loans (over Fannie Fae/Freddie Mac limits) were not securitized but rather kept in bank's “portfolio”. Further, many loans were “repurchased” due to missing documents/breach of representation/evidence of predatory lending. Therefore, even if mortgage loan was contained in original “Mortgage Schedule” – it does not mean it stayed there. Know of no public records where this information is available.
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No one here can answer that question for you as the exact procedure varies by not only state, but county and even the city within the county.
The people you need to contact is the courthouse….and ask if it's possible that you can purchase ______ for back taxes.
If it is, they will tell you.
However, it does require some special paperwork to be filed…and they won't tell you how to do it…..that is when you'll have to get a real estate attorney to help.
Don't buy the house without an appraisal and an inspection.
PS: If it's already slated to be torn down …..the city won't allow a transfer of the property…which may be the reason she doesn't pay the taxes on it.
Good luck! When we bought our house back in December we had MANY issues with the whole buying process. I must say that you should savor this purchase, b/c it'll probably be the only time that you are ever buying a house without having to deal with selling one too…that's where most of our problems came from. Also, the whole closing costs thing…those things are ridiculous. We got a great deal on our closing costs this time b/c we put down more than 20%, and we didn't ask the seller to pay any of ours, so we got a better deal on the house.
http://www.abestfinance.com My mortgage broker gave my loan away and we had to pay closing costs twice!?
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Your analogy is only partially correct. Although we do all "play this game" and the "banker" does keep reaching over and taking 10% to 15% of all the chips, the banker also returns chips to the game through it's own expenses. They do not only sit on the outside. They participate but are experts in the game. They return chips to the game through salaries, rentals, advertising, donations, sponsorships, shareholder dividends etc. Thus the chips are not completely removed from the game, just restructured within the game and reintroduced at the "bankers" desired time.
The "banker" generally has more chips than the other players, but it doesn't keep the chips indefinitely. The "banker" also "lends" chips from a higher "banker" (Reserve bank) to fund the other players mortgages and loans and those funds in turn are also taken from the players and reintroduced to the game through salaries, rentals, etc. The number of "chips" in the game remains the same, the distribution will never be equal. But the "banker" can not keep the "chips" indefinitely as they must pay the player who does the collection of the 10% or 15%.
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Do you need a cosigner to remortgage your house?: We had a cosigner for the original mortgage. We are great with…
It doesn't matter where you pick it up or preorder it from. Apple stores also have access to AT&T's database, you could renew your contract there. Obviously AT&T can do it too, so it is completely up to you and where you want to go.
I don't think anyone can predict the future, but I can tell you that so far there has always been lines for new iPhones.
The seller, who has the original mortgage sells his home with the existing first mortgage in place and a second mortgage which he “carries back” from the buyer. The mortgage he takes from the buyer is for the amount of the first …
Call AT&T and ask them how it works, either way your going to be coming out of the pocket for this new device.
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I would go to your local AT&T store to get the full terms and reguations regarding this issue.
I hope this answered your question.
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