Ollie Desalvo: here we go!!Should I refinance? As a general rule, if you can shave at least a half point off your current interest rate, it is a good idea to refinance. If you currently have a home mortgage above 7%, the time is now to make a change. However, your decision should also depend on how long you plan to stay in your home. If you are only going to stay 2 to 5 years, you should figure out the cost of the refinance. Will you pay more in closing costs than you will save on your monthly payment? For those who plan to move after a few years, a "no-cost" loan, which drops your mortgage payment a significant amount, would probably make sense. What is a "no cost" or "zero cost" loan? A "zero cost" loan means that you pay no closing costs for the loan. A "zero cost" loan is different than a "zero point" loan. You will probably have to take a higher rate to get a zero cost loan, but that is okay. Closing costs include appraisal, credit report, processing fee, underwrit! er fee, attorney fee, notary fee, title insurance and any other fees the lender may make up. Closing costs typically cost between $2,000 and $2,500. How do I find good rates? Clark likes using two main websites for quotes: monstermoving.com and bankrate.com. Both give you the option of selecting the number of points you want to pay. Monstermoving.com also allows you to select from lenders offering "zero cost" loans. Remember to call and verify the loan rate, and make sure the loan officer you speak to adheres to that published rate. Choose the lender that offers the lowest total cost for the first 30 months of the loan. What are points? A point represents 1% of the total amount of money borrowed. There are two types of points. Borrowed points are a profit paid to a lender. Discount points are a fee paid in advance to lower the interest rate over the life of a loan. Do I have to stay with my existing mortgage company when I refinance? No. You are under no obligation ! to remain with your current lender. But it is a good idea to l! et them know what you're planning to do so they'll offer you their best rate. Should I change from a 30-year to a 15-year loan when I refinance? If you can afford to pay a bit more each month to pay off your loan, this is a smart move. Clark's previous producer Teresa was in this situation. The balance on her home was $118,000. She had been offered a 15-year "zero cost" loan at 6.5 percent. Her monthly payment would go up to about $1,300. That's $200 more than the $1,107 she would pay on a 30-year loan. But, over the life of the loan, the 15-year loan would save her $8,795. For help calculating your costs, go to hsh.com. I'm being told I should roll other debts into my loan, or get a "cash out." Is this something I should consider? No. Your loan should be for the exact amount you owe and no more. You do not want to add to the interest you owe by increasing the amount of your loan. What is a "good faith estimate?" Do I need one? Yes. Every lender you talk to should ! mail or fax you a good faith estimate of all charges when you discuss a refinance with them. The estimate will include such things as a list of fees, including closing costs, calculated taxes and your estimated monthly payment. The estimate gives you documentation to refer to at the closing of the loan, as well. I hope this will help you make a decision!!...Show more
Ariel Arons: You need to look at the whole picture and see if refinancing will save you money. Some people just look at monthly payment, but closing costs and length of payments factor in too. If 10 years into a 30, you refi for another 30 years, sure your monthly payment will be lower, but you will be paying interest for a longer period of time.Personal example, I bought my home in 2002 @ 7% for 30 yrs. Interest rates came down, but I did not have cash for closing costs to refi. In early 2005 I started getting offers from my current lender 6.25% with no closing costs or 5.99% with closing costs. I! chose the latter, but since they already had all papers and lien from ! original loan, total closing costs were only $170 to refi down to 20 yrs, shaving 7 years of payments and $62,000 interest off of my loan. Monthly payment was $30 higher, but overall cost was much lower.I may have been able to get a somewhat lower rate from another lender, but closing costs likely would have been thousands of dollars I did not have at the time....Show more
Stormy Beliard: I agree and disagree with slyvia's response. She does have a very indepth answer and has some valid points to consider, but no one here can tell you to refi or not. I would not refi if my only benefit is to reduce my rate by half a point, it's not worth it. Now if your reducing your rate by half a point and knocking 10-15 years off your term, yes, refi, you may not lower your monthly payment dramatically, but your save thousands in finance charges in the long run. If you have credit card debt, you cannot write off the interest that you pay, but you can write off your mortgage in! terest and increase that yearly check from uncle same. Maybe you need to fix the roof, maybe you want to kick start your 401k I don't know what your dreams are, your goals for retirement, etc. What I do know is that if you refinance, it should be a customized mortgage solution to finance your dreams and goals. Don't become a rate chaser, just because you get a lower rate doesn't not equate to a better overall financial plan, slyvia did not mention closing costs, which I believe she's rolling into the loan amount, but what if closing costs push you higher than what you owe? The point that many people tend to forget when rate chasing is that closing costs are generally rolled into the loan if they don't bring them to closing out of pocket, thus your financing closing costs for the first couple of years after signing the docs. and if you only reduced your rate by half a point, is it worth it. You've worked very hard for your home, and refinancing should have both immediat! e and long term solutions in mind, hopefully exceeding your dreams, whe! ther it's allowing you to retire early, or finance johnny's college education, or buying that home to retire in. Know what you want first, not only now, but years from now. Make sure you not just getting some cookie cutter mortgage that requires no input from you or thought from your mortgage professional, if they do not ask you about your dreams and goals, find one that does, best of luck...Show more
Ayesha Genova: You have to take in a couple of things before deciding on this.1) Do you need extra money?2) What is the purpose of refinancing?3) What is your current mortgage ( 5 year ARM, 30 year fixed, etc.)4) How long have you been in your loan?With out knowing those basic questions it would be hard to answer. If you talk to a lender or a bank they are going to tell you that refinancing is always your best option. BUT, you should know how lending works.First off, the average person should never enter any type of ARM or interest only loan unless they have a sound fi! nancial structure and really understand the market. If you are in one of those scenerios where you have a loan like that, go ahead and refi, it will help you in the long run.However, lending works off the rule of 50/25. After 50% of the life of your loan, you have paid off 25% of your principle. So if you loan is for 200K and you have a 30 year fixed. After 15 years, you still owe 150K on your principle. That's how lenders make so much money.So if you refi, you will be right back to square one. So this leaves with a couple of things to look at:A) If you are trying to get into a fixed Mortgage, refinance.B) If you are trying to pay your loan off quicker. Make dual payments or extra payments if you can. Interest is calculated daily. So if your monthly payment is $2000. Pay 1000 on the 1st and 1000 on the 15th. Over the long haul you will save a ton in interest and pay your house off much quicker.C) Look into getting a Smart Loan where you will have a higher interest rate but ! DO NOT relate that to an APR. With a SMART Loan, it may even be your be! st bet to roll all your debt into the same loan. You should speak to a financial advisor about this. ( Make sure you don't pay them a flat fee, find someone that will give you quality advice free of charge. There is no sense in paying for very simple information. If you have more questions on this, please feel free to contact me.)Note: With an APR of 6%, that does not equal an interest rate. You will never pay 6% until the end life of your loan. For the first 3 or so years you will be paying approx 85% interest. So if you took that same $2000 a month payment; 300 would go to your actual principle and 1700 would go to the bank as interest. So if you wanna think of interest rates, look at it that way. A SMART Loan normally has an interest rate of 15% or so. That mean for every payment 300 goes towards interest and the rest goes to the principle of the loan. That will allow you to save an arm and a leg over the life of your loan, and you will pay it off in about half the time! .Again, these are brief summaries and it's hard to give you a real answer with out looking at your financial situation.I hope I have been helpful and let me know if you need any more information or have any questions....Show more
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