Refinancing Tips

Here are some good tips before you start about refinancing your loan or motgage. These tips apply to everyone, and are not to be taken as personnal advise.
You should always consider your own details, credit score & current mortgage status before proceeding with refinancing your loan.

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There are 3 golden rules that should be applied when considering Home Refinance or Mortgage refinance:

  1. The diffrence between your Mortgage rate and the Market Rate is at list 2%.
    (i.e. Your mortgage has a rate of 5% for the next 10 years and you heard that current market rete for 10y loans is 3%)
  2. Can you break even shortly ?
    If you save approx. 200 $ monthly when refinancing your mortgage, and your current Mortgage closing costs are 2,200$, it will take you 11 monthes to “break even”. If it takes too long (a few years) than the refinance is not worthwhile.
  3. You are planning to stay in your home. don’t get into a new loan (that will have a bigger balance to pay) if you intend to sell your home soon. This rule is even more pressing if you plan to sell your home before you “break even” (see bullet # 2).
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Consider the variables in the mortgage you are about to take: APR (Annual Percentage Rate) is just one variable to consider. ARM (Adjustable Rate Mortgage) is another option that will help reduce your rate.
ARM loans have high rate-percentage flunctuation but they reduce the Loan Interest rate considerable, vis a vis the equivilent Fixed rate.Don’t forget to consider all the new Mortgages’ fees: discount or origination fees should be taken under consideration as well as the closing costs mentioned above.
The new mortgage you will take may include: Lender/Broker Fees can reach up to 2,700$ for a 200K $ loan (!), Third party Fees such as appraisal, attorny and insurancing the property can reach up to 1,800 $ and various taxes and recording fees another 1,300$ or so.
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Make sure you check all your options! While your current lender have already the required documentions, he may not offer the best rate in the market. Make sure you take up prelimanry offers from different lenders/financial institutions. This will allow you to make sure your current lender will also give you a good offer!
When having at list another offer on hand – you will be able to check which is better, refinancing your loan at your current lender or starting over with a new institutes.
Notice – some institutes may be willing to cover some of your new mortgage costs, in order to attract new loaners; use that for your own advantage.

In coclusion, shop around! find the bets alternative for you!
Make sure you are selecting your new mortagage based on all the variables and costs while considering your “break even” point.
Don’t just look at the annuall rate percentage – and make sure you consider all the costs and read all the socumentation before you sign on a remortage or a new loan.
Good luck.

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