The offer sounds great: Your lender promises that when you refinance your mortgage loan you'll be able to skip a month...
A refinance is a refinance, and if you are thinking about one you should read on to educate yourself to find out whether refinancing is right for you.
Benefits of Refinancing - On/Off Line
A refinance is an entirely new loan with new terms that pays out your existing loan and takes over. Because refinancing, an "online refinance" or not, is a new loan it comes with all the costs that accompany the set up any new loan. Well, if you have a loan already then why would you shell out another couple grand for something you already have? You wouldn't, unless by investing a few thousand in a new loan you could save a few thousand every year for years to come.
Now it is more complicated than that because people refinance for all different types of reasons given their specific circumstances. One thing is for sure, if your particular circumstances are agreeable for a refinance loan, then by not moving forward in the right direction you are costing yourself hundreds, probably thousands, of dollars per year in unnecessary interest costs.
- Lower your interest rate, lower your monthly payments
- Reduce or increase the length of your mortgage
- Get cash out
- Consolidate a first and second mortgage
- Get out of your ARM and fix a rate while they're still low
If you are not financially inclined, you don't follow the markets, your eyes glaze over when folks on the news start talking about short term interest rates, etc. let's get you up to speed.
From 2003-2005 mortgage rates hit 40-year lows, most websites that speak about an online refinance will tell you rates still are at 40-year lows, but they are fibbing; however rates are still historically very low. Thirty-year fixed-rate averages are hovering around 6.34 percent, up from sub-six levels that were cause for all the rage in the mortgage industry from 2003-2005, but remain below the twenty year average of eight percent. There is a huge different between 6.5 percent and eight percent; let's examine a typical mortgage situation.
A Refinancing Example
For example, if you have a $250,000 mortgage at a rate of nine percent your mortgage payment is $2,011 per month; if your mortgage balance remains the same but you have a rate of seven percent your mortgage payment is $1,663 per month - a $350 dollar difference per month! The factors used to calculate what rate you can get - short-term rates, your credit rating, house value, etc. - are constantly in flux, and competition for new customers like you is fiercer than ever as the refinance boom winds down. Take you first step towards online refinancing at Mortgageloan.com by comparing rates for free!
Concerns and Options
When you refinance it is a totally new loan hence you will again be paying mostly interest instead of principle and depending on how far you are into your current loan that can be a concern. Really take a look at your motivation for refinancing and make sure it is a refinance that you do in fact need. If you are simply going for a lower interest rate and you can get it, by all means, go ahead. Or, if you are in an adjustable-rate mortgage and need out before your readjustment occurs, again, by all means, do so. When in those situations a refinance is most likely going to be best, but be sure to do a little pen and paper work to see how long it will take to recoup the cost of the refinance in monthly savings; for instance, if you pay $5,000 for a refinance to save $200 a month you will have to own that property for another two years to see any real financial gain.
Mortgageloan.com can help you a bit with your refinancing online through our free online refinance comparison quote service. We have been putting loan experts in touch with people like you since 1995.
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