3 Ways to Determine if You Should Refinance or Not
Darren Meade
October 26, 2006
If you are considering refinancing your home, you likely have many questions. If you are confused, you’re not alone. It can be very confusing. We hope that this report will help answer your questions. Our goal is to educate and inform you so you can make the best decision possible when choosing a mortgage loan.Many refinancing options are available.
First, you need to understand that there are a few different refinancing scenarios:The most commonly used is the traditional refinance, which is where the lender replaces your old loan with a shiny new one, and in most cases, moves you to a lower interest rate. This, in turn, lowers your monthly payments.
The second type of refinance is a “cash-out refi”. A cash-out refinance works like a traditional refinance, except that you’re also able to access some of the equity that has built up in your property over the years. This type of loan can make sense if you’re seeking to pay off other high interest bills, remodel your home or make some other major purchase.
Lastly, is the Refinance with an Equity Line of Credit. It’s identical to the first scenario, except that in this case, you refinance your existing mortgage and then take out an equity loan to provide you access to a portion of the remaining equity in your home.
To Refinance or not (…that is the question)A very old rule of thumb says that if mortgage rates drop by 2%, it's time to refinance. If you're planning to stay in your home for a while, and you find a good deal on refinancing costs, it may be worthwhile to refinance, especially if you have productive plans for your equity.Here are a few questions you need to ask yourself that will help you decide whether right now is the best time to refinance or not:
1.) How long do you plan to live in your home? The average homeowner stays in their home for 8.2 years. Compare this number to the amount of time you have lived in your home. If you are planning on moving in the next few years, it’s probably best not to refinance. The cost of refinancing will likely not be worth it. However, if you are already a client of Victory Mortgage Lenders, then you qualify for our No Cost refinances.
2.) How expensive will it be to obtain the loan? This is the big question. Shop around with different lenders for the best rates. Just be aware that the rates you are quoted on the phone will likely change within 24 hours and that they are based on good credit, many times with points that add to total costs.If you find a great rate with few costs involved, you should move to question 3. For a guaranteed lowest bottom-line cost in writing, contact us today! We guarantee that we will beat any lenders closing costs or we’ll pay you...
3.) What is the break-even point? Beware of mortgage lenders who try to use the old “break-even point” principle. It states that if you divide the cost of your new loan by the monthly savings of the new one, you will be able to find out how many months it will take to “break-even”. While this principle is fairly accurate if your existing loan was originated in the last few years, it can lead you seriously astray if you have a loan that was originated, for example, 8 to 12 years ago. Because of this, it is VERY difficult to ascertain whether or not you are good refi candidate, without considering a number of factors. For this reason, we strongly recommend that you seek out expert advice from a reputable mortgage professional.
Conclusion
As you can see from the above example, it is very difficult to decide whether or not to refinance unless you consult with a qualified mortgage professional. Getting rates over the phone is an impossible and often misleading task, because to take advantage of them you need great credit and you would need to lock in and close right away. Discovering your “break-even point” can also be very difficult without the assistance of a professional.
How to Get Professional Refinance Advice…FREE!
Take advantage of our 100% FREE, No Obligation “Refinance Shopper’s Coaching Session”. Let us help you determine if you are a good refi candidate or not. Don’t waste thousands of dollars refinancing when it’s not necessary. Let us steer you in the right direction.
Here’s what we cover in our FREE 30-minute "Refinance Shopper's Coaching Session”:
We’ll tell you if you are a true “refi candidate”
We’ll show you how to pick the right refinance option
We’ll disclose to you what interest rates you qualify for
We’ll promise our lowest closing-costs guaranteed, in writingStop wondering and find out from a professional whether or not refinancing is the best option for you. TAKE ACTION NOW and leave the guesswork to us!!
First, you need to understand that there are a few different refinancing scenarios:The most commonly used is the traditional refinance, which is where the lender replaces your old loan with a shiny new one, and in most cases, moves you to a lower interest rate. This, in turn, lowers your monthly payments.
The second type of refinance is a “cash-out refi”. A cash-out refinance works like a traditional refinance, except that you’re also able to access some of the equity that has built up in your property over the years. This type of loan can make sense if you’re seeking to pay off other high interest bills, remodel your home or make some other major purchase.
Lastly, is the Refinance with an Equity Line of Credit. It’s identical to the first scenario, except that in this case, you refinance your existing mortgage and then take out an equity loan to provide you access to a portion of the remaining equity in your home.
To Refinance or not (…that is the question)A very old rule of thumb says that if mortgage rates drop by 2%, it's time to refinance. If you're planning to stay in your home for a while, and you find a good deal on refinancing costs, it may be worthwhile to refinance, especially if you have productive plans for your equity.Here are a few questions you need to ask yourself that will help you decide whether right now is the best time to refinance or not:
1.) How long do you plan to live in your home? The average homeowner stays in their home for 8.2 years. Compare this number to the amount of time you have lived in your home. If you are planning on moving in the next few years, it’s probably best not to refinance. The cost of refinancing will likely not be worth it. However, if you are already a client of Victory Mortgage Lenders, then you qualify for our No Cost refinances.
2.) How expensive will it be to obtain the loan? This is the big question. Shop around with different lenders for the best rates. Just be aware that the rates you are quoted on the phone will likely change within 24 hours and that they are based on good credit, many times with points that add to total costs.If you find a great rate with few costs involved, you should move to question 3. For a guaranteed lowest bottom-line cost in writing, contact us today! We guarantee that we will beat any lenders closing costs or we’ll pay you...
3.) What is the break-even point? Beware of mortgage lenders who try to use the old “break-even point” principle. It states that if you divide the cost of your new loan by the monthly savings of the new one, you will be able to find out how many months it will take to “break-even”. While this principle is fairly accurate if your existing loan was originated in the last few years, it can lead you seriously astray if you have a loan that was originated, for example, 8 to 12 years ago. Because of this, it is VERY difficult to ascertain whether or not you are good refi candidate, without considering a number of factors. For this reason, we strongly recommend that you seek out expert advice from a reputable mortgage professional.
Conclusion
As you can see from the above example, it is very difficult to decide whether or not to refinance unless you consult with a qualified mortgage professional. Getting rates over the phone is an impossible and often misleading task, because to take advantage of them you need great credit and you would need to lock in and close right away. Discovering your “break-even point” can also be very difficult without the assistance of a professional.
How to Get Professional Refinance Advice…FREE!
Take advantage of our 100% FREE, No Obligation “Refinance Shopper’s Coaching Session”. Let us help you determine if you are a good refi candidate or not. Don’t waste thousands of dollars refinancing when it’s not necessary. Let us steer you in the right direction.
Here’s what we cover in our FREE 30-minute "Refinance Shopper's Coaching Session”:
We’ll tell you if you are a true “refi candidate”
We’ll show you how to pick the right refinance option
We’ll disclose to you what interest rates you qualify for
We’ll promise our lowest closing-costs guaranteed, in writingStop wondering and find out from a professional whether or not refinancing is the best option for you. TAKE ACTION NOW and leave the guesswork to us!!
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