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Why and how to
Refinance Homes ?
Information on Loans & mortgage
for
Home Refinancing .
Most people refinance homes to save money month-to-month, but do your math before you change your home loan for another, because you could be wasting your time and money.
Consider the following when you refinance homes:
1. Your costs: Add up all the costs and refinance fees, which might include, fees for the application, attorney, credit report, extra insurance, private mortgage insurance, recording, survey, title insurance, loan origination, appraisal, underwriting and others.
2. Your Savings: Figure your monthly savings subtract your current monthly payment from your refinanced mortgage monthly payment.
3. Taxes: Multiply your monthly savings by your federal and state tax rate.
4. Your Savings: Subtract your tax cost (a cheaper loan gives you a smaller tax benefit ) from your monthly savings.
Divide your total costs by your net savings to determine how long (amount of months) it will take to pay off the cost of refinancing.
An example, if you will save $100 a month on the refinanced home and the refinanced mortgage costs you $1,500 it would take you over one year, 15 months, to break even and start feeling that savings.
If you plan to move within two years, that loan might not be for you.
5. The hidden costs: Prepayment penalties when you refinance homes can be as high as six months interest on 80 percent of your balance, but reduce the longer you hold the loan.
If you are going to stay in your home for a few years, a zero point loan option would likely be a better deal because you may not have the opportunity to recoup those costs. If you are staying longer with more time to recoup costs, consider a cheaper interest rate with points.
To get the best deal, contact your current mortgage lender. Some lenders have marketing programs designed to retain and try to keep current borrowers by offering them special low-rate, low- or no-cost refinance packages.
Even if your current lender makes a deal which you might like, use that mortgage and refinance offer as a benchmark but look around for the best deal. To get help on offers, consider references from real estate agents and others you trust, family members, co-workers, especially those which might have recently had to refinance homes.
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