refinancing web page discussion.notebook January 14, 2016 Mortgage Options REFINANCING

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Flora Moore
5 years ago
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1 Mortgage Options REFINANCING

2 Define Refinancing Paying off one loan by obtaining another Generally done to secure better loan terms (Like a lower interest rate)

3 Should You Refinance? Whether or not to refinance depends on your own personal financial situation. There are many mortgage options available can vary according to the interest rate, credit score, lender and loan amount Depends on your situation... the best option may be to do nothing at all.

Example: initial loan after 5 years balance was at $55,438.

4 Example: initial loan after 5 years balance was at $55, After some research ~ interest rates dropped Refinanced home with a lower interest rate a shorter loan length AND Larger amount borrowed Pro: Lower Interest rate Shorter Loan Length to 15 years Total Interest Paid Decreased Used the extra cash to pay off Auto - Credit Cards Put remaining in savings as emergency money Cons: Monthly Payment INCREASED by $51.81 MUST repay $75,000 rather than $55,438

5 Points to consider: Do you have the funds that refinancing may require to cover up-front costs and fees? generally include... Attorney's or escrow fees (Yours and your lender's if applicable) Property taxes (to cover tax period to date) Interest (paid from date of closing to 30 days before first monthly payment) Loan Origination fee (covers lenders administrative cost) Recording fees Survey fee First premium of mortgage Insurance (if applicable) Title Insurance (yours and lender's) Loan discount points First payment to escrow account for future real estate taxes and insurance Paid receipt for homeowner's insurance policy (and fire and flood insurance if applicable) Any documentation preparation fees If there is enough equity in the property at the time of refinancing, the owner may choose to finance their closing costs and fees by adding them to their current mortgage balance

6 How long will it take to recover the costs of refinancing? The rule of thumb is that refinancing costs are recovered within 2-3 years If you plan to sell the house or pay it off shortly... you may NOT want to refinance you will not recover the costs

7 Has your income increased substantially? If your income has increased substantially you may be able to afford higher monthly payments This may allow you to shorten the term of your mortgage If... the prevailing interest rate is lower for the shorter term mortgage, refinancing is a good option or... may prefer to make larger principal payments against your current mortgage

8 If you don't stay long enough to recover your costs, refinancing is a bad strategy The longer you stay past your break-even point, the more you'll tip the balance in favor of refinancing

9 I notice/hear that interest rates have fallen. (I am not guaranteed that they will continue to fall or even stay at the new lower rate) Do I roll the dice and take a chance that the new rates will be the best option? or... Do I wait for them to go lower? If so they may increase and I missed the opportunity or they may in fact go lower and I can save more money! What do you do?

10 Scenarios... You have been paying on your current loan for 5 years Interest rates have fallen by ½ % You look at a new 30 year loan or... do I wait for them to fall by 1% What will I save if I wait? What will I lose if they go back up? You will need information from your original loan to complete these sections... Original Loan Amount = (what you borrowed from the bank) Original interest rate = (lowest rate you found) Appraised value = (the price the house was selling for) Terms in years = (your original loan length) Years remaining = (how many years have you been paying less years original loan was for)

the minus next to Monthly Payment Breakdown This is

13 Click on view report to get results and react to the situation Scroll down to Refinancing Summary Click on the minus next to Monthly Payment Breakdown This is the information you will need to respond to for the project

14 You MUST answer the following questions based upon the scenarios given You MUST EXPLAIN 2 pros and 2 cons to each of the scenarios Your total interest paid will increase or decrease by how much? (underline/highlight) What will your new monthly payment be, based on the new mortgage? (underline/highlight) Briefly EXPLAIN why you would, or you would not, refinance given this situation? Scenarios... You have been paying on your current loan for 5 years Interest rates have fallen by ½ % You look at a new 30 year loan or... do I wait for them to fall by 1% What will I save if I wait? What will I lose if they go back up?

15 Given this scenario I would NOT refinance! I will be spending $5,751 MORE with the new loan even though I will save $ per month on my Mortgage - I would wait for rates to go lower!

16 Given this scenario I would refinance! I will be saving $4,202 with the new loan AND I will save $ per month on my Mortgage - I will take this opportunity!

17 Scenarios... You have been paying on your current loan for 5 years Interest rates have fallen by ½ % You look at a new 15 year loan or... do I wait for them to fall by 1% What will I save if I wait? What will I lose if they go back up? You MUST answer the following questions based upon the scenarios given You MUST EXPLAIN 2 pros and 2 cons to each of the scenarios Your total interest paid will increase or decrease by how much? (underline/highlight) What will your new monthly payment be, based on the new mortgage? (underline/highlight) Briefly EXPLAIN why you would, or you would not, refinance given this situation?

18 Given this scenario I will be saving $34,057 with the new loan BUT I will pay $ MORE per month on my Mortgage - I will take this opportunity as long as I can afford the monthly payments!

19 Given this scenario I will be saving $38,386 with the new loan BUT I will pay $ MORE per month on my Mortgage - I will take this opportunity as long as I can afford the monthly payments!

20 Scenarios... You have been paying on your current loan for 13 years Interest rates have fallen by ½ % You look at a new 15 year loan or... do I wait for them to fall by 1% What will I save if I wait? What will I lose if they go back up? Given this scenario I will be saving $8,026 with the new loan AND I will SAVE $15.48 per month on my Mortgage - It is a great opportunity and I will take this opportunity to refinance BUT I would like to wait for rates to go even lower!

21 Given this scenario I will be saving $11,473 with the new loan AND I will SAVE $34.63 per month on my Mortgage - It is a great opportunity and I will take this opportunity to refinance!

How to Refinance Your Mortgage at the Most Competitive Rates

How to Refinance Your Mortgage at the Most Competitive Rates Your Mortgage It is vital to get the best deal on mortgage refinance rates to refinance your mortgage. The following 12 steps are going to help you lock in the lowest possible mortgage refinance rates.