According to the Mortgage Bankers Association, 66% of mortgage applications were for refinancing in October. Clearly, home owners want to take advantage of historic lows in interest rates and lower their monthly expenditures. However, be advised that refinancing your mortgage does not aid everyone who does so. To achieve a maximum benefit by refinancing your mortgage, read these three tips.
First, if you plan to stay in your home, refinance if the interest rate is at least a 0.5% difference. If you own a 100 000$ home and pay an interest of 6% by thirty years, switching to a 5.5% rate saves you roughly 30$ a month. Over a 30 year period, that really adds up. However, the cost to refinance—things like fees and closing costs, etc.—can amount to up to four percent of the loan’s new value. So, you will probably need a change of at least 1% interest to maximize your savings.
Second, refinance if you need extra money. Homeowners have used their property to cover unforeseen or rare financial needs. However, since housing prices have plunged, banks have become increasingly unwilling to lend this way. But if you have a lot of equity, lenders will be more likely to refinance. You need to understand that the new loan will be for more than the current one—this is so the lender can profit. Also, banks will typically want to retain 30% equity minimum, so this sets a limit to how much cash you can get.
Third, refinance if your adjustable-rate mortgage is going to reset before you plan to sell. With interest rates as low as they are, and the economy recovering, rates have no where else to go but up. Knowing this, homeowners with ARMs may want to get into fixed loans soon. You may miss a year of or low interest because some ARMs are resetting at less than 5%, but you could save thousands over the duration of your loan as rates climb. Only people who plan to sell their homes before their rates are set to readjust should not refinance.
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This is very timely while mortgage rates are still low in some areas.
I will be sure to pass it along.
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[...] Home Mortgage Refinance Loan wrote an interesting post today on  Here’s a quick excerpt  According to the Mortgage Bankers Association, 66% of mortgage applications were for refinancing in October. Clearly, home owners want to take advantage of historic lows in interest rates and lower their monthly expenditures. … [...]
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