Navigating the Tricky World of Mortgage Refinancing Part 2
written by Credit-HQ ExpertThere is something worth noting that many of the online refinancing “cost benefit” analysis calculators that has to do with how the final monthly payment that you review includes principle and interest. What you really need to know is the difference in interest you are paying compared to what you are paying now. The number you get from the calculator could also be artificially lower because the term of payments are different than your current loan. That makes an “apples to apples” comparison more difficult to do.
Its about the bucks!
Be careful when you are considering offers for a refinancing deal that talks in terms of percentages. An offer to lower your month payments “by 5%” is too vague. You need hard figures in terms of dollars saved by the lower interest rate and by that interest rate only to know for certain if the refinancing deal is wroth the effort in light of the costs. Costs, after all, are hard dollar figures so to do a good job evaluating a new deal, you need savings expressed in dollars as well.
When you know in real dollar values what the new interest rate can do for you, there is another approach that could be the smartest way to leverage a newly refinanced mortgage. Instead of taking out another 30 year loan with the new interest rate, consider using your calculation tools to find how to keep your current payment the same while reducing the term of the loan. If before the refinancing, you still had 25 years left on the loan and you refinance into a 15 year loan at a lower rate, you save 10 years of payments and a lot of interest along the way. And if the end results of that change is your monthly mortgage payment has not changed significantly, your budget is unharmed. But you have taken a big step forward in long range financial planning.
After you have run your own numbers to determine if considering a new mortgage makes sense, be sure you connect with a loan officer you can trust to compute the real numbers you will see when the refinancing is done. Make sure you are not only working with lending institution that you trust and with a loan officer who has some credibility. That means that he is looking after your welfare and that he knows what he is talking about when you get into the nitty-gritty of refinancing a loan.
Your loan officer should not talk in the language of accountants using terminology that you cannot relate to. If he seems to get a big kick out of confusing you and impressing you with fancy accounting terms, get out of there and get with someone who understands those terms but can also speak English to you. That combination of expertise and customer concern is what you want in an agent you are entrusting with the biggest contract you may ever be involved with which is your mortgage.
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