Refinancing - when to do it, how to go about it
Is refinancing the best decision for you? Most homeowners believe the only way to lower their monthly payments and at the same time free up cash that they can re-invest elsewhere is to refinance. But, is it really? If you have only a small balance left on your loan, the answer is no. Similarly, if you only have a few years left to pay off your loan, the answer is an even bigger no. In both situations, it is better to send off extra payments than to incur new loan costs, which typically range from 3 to 6 percent of your outstanding principal.
In contrast, you should think about refinancing if you owe piles of money and if you still have a lot of years left on the loan. Throw out the 2 percent rule; most homeowners are doing so. In the past, many homeowners followed the 2 percent rule, which states that you should refinance only if your new rate is two points lower than the old one. Today, a dip of 1 point is enough reason to retire an old loan and take on a new one!
Of course, before you actually retire your existing loan, take the time to do your research. Ask a mortgage broker or officer to tell you by how much the new rate would lower the monthly payments you have to make. Also, find out how long it would take to recoup your closing costs on your new loan. This cost is called the break even point, and it's one that many homeowners do not bother themselves with. Or, you can try running these numbers yourself. You can use the mortgage tools available in websites like Bankrate, HSH Associates, and Quicken Loans. Run the numbers and pay attention to what they tell you. If, according to the results, refinancing makes sense, then go ahead and do so. Follow these tips to make sure you get the best deal.
Don't Rely Blindly on Published Rates
The truth is, companies publish their best rates but this is not the rate they will offer you. This rate will most likely be offered to their top 10 percent applicants, nothing more. Ultimately, you will find that the rate you can get is much smaller than what has been published.
Start With Your Current Lender
If you hold a considerable mortgage, you pay on time, and you have good credit, your present lender will do everything to keep you as a customer. They may lower your fees or even agree to shoulder charges on inspections, surveys, and appraisals.
Say No to No Cost Refinancing
If you're thinking no cost means everything is free, you think wrong. On the contrary, you end up paying more. All closing costs are bundled into your new mortgage, which means you will end up paying interest on everything. As a matter of fact, if you have a 30-year mortgage, for instance, all the fees associated with it could easily double up than if you had simply issued a check for everything at closing. So no, don't be taken in by the phrase "no cost". It's misleading; no one's giving you anything.
Refinancing is a smart move but only if you know what you're doing. If you don't, you could end up spending more than you're saving.
Allegro Mortgages Corp. – Best Broker for All Your Financing Requirements
In contrast, you should think about refinancing if you owe piles of money and if you still have a lot of years left on the loan. Throw out the 2 percent rule; most homeowners are doing so. In the past, many homeowners followed the 2 percent rule, which states that you should refinance only if your new rate is two points lower than the old one. Today, a dip of 1 point is enough reason to retire an old loan and take on a new one!
Of course, before you actually retire your existing loan, take the time to do your research. Ask a mortgage broker or officer to tell you by how much the new rate would lower the monthly payments you have to make. Also, find out how long it would take to recoup your closing costs on your new loan. This cost is called the break even point, and it's one that many homeowners do not bother themselves with. Or, you can try running these numbers yourself. You can use the mortgage tools available in websites like Bankrate, HSH Associates, and Quicken Loans. Run the numbers and pay attention to what they tell you. If, according to the results, refinancing makes sense, then go ahead and do so. Follow these tips to make sure you get the best deal.
Don't Rely Blindly on Published Rates
The truth is, companies publish their best rates but this is not the rate they will offer you. This rate will most likely be offered to their top 10 percent applicants, nothing more. Ultimately, you will find that the rate you can get is much smaller than what has been published.
Start With Your Current Lender
If you hold a considerable mortgage, you pay on time, and you have good credit, your present lender will do everything to keep you as a customer. They may lower your fees or even agree to shoulder charges on inspections, surveys, and appraisals.
Say No to No Cost Refinancing
If you're thinking no cost means everything is free, you think wrong. On the contrary, you end up paying more. All closing costs are bundled into your new mortgage, which means you will end up paying interest on everything. As a matter of fact, if you have a 30-year mortgage, for instance, all the fees associated with it could easily double up than if you had simply issued a check for everything at closing. So no, don't be taken in by the phrase "no cost". It's misleading; no one's giving you anything.
Refinancing is a smart move but only if you know what you're doing. If you don't, you could end up spending more than you're saving.
Allegro Mortgages Corp. – Best Broker for All Your Financing Requirements
Bary Dawn
Thinking of refinancing? A quick look at the best mortgage rate Toronto lenders provide and the most competitive terms for mortgage Concord companies offer can help you make an informed decision better!
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