Home Refinance
It is true that home refinancing has the potential to help you reduce the cost of your monthly mortgage payment, but the decision to do a home refinance is one you should make based on whether or not the long-term savings outweigh the initial expenses. A refinance only makes sense when you can lower your interest rate, and in some cases possibly even change the terms of your current mortgage. Another important factor is how long it will take you to break even to recoup your overall savings to compensate for the cost of the refinancing.
Breakeven Point of Home Refinance
One or the most important parts to consider before you refinance your home is to know how to calculate your breakeven point. In order to find your breakeven point of home refinance you’ll need to divide the cost of the refinance by your monthly savings. The reason behind this calculation is to let you know how long you need to stay in the home to make the refinance strategy work. Don’t select a new mortgage only based on the interest rate.
For example: You’re a homeowner with a 30 year fixed $400,000 mortgage that’s charging 6.625%. You would pay $2,561.24 monthly. You’ve decided that you’d like to do a home refinance, so you give us a call, and we work up some preliminary numbers for you.* We come up with a 30 year fixed $400,000 mortgage that’s charging 5.125%. You would pay $2,117.95. Your monthly savings is $443.29. With a $4,500 closing cost, you would recoup the cost of your home refinance in just over 10 months. So, if you plan to stay in your home for a little more than 10 months, then the home refinance strategy pays off for you.
How to get started on a Home Refinance
Once you’ve made the decision to move forward on your home refinance, you should call either Bob or Orlando and we’ll work to get you pre-approved. Or you can start by completing a mini application or even the short application. Remember, the more information you give us, the more helpful we can be to you.
