Need advice on whether to consider a mortgage refinance
Question: >I have a mortgage, but this is an area of life that I’m >not much up on. I heard a bit on a consumer show yesterday >about (and I think I got this right) a “no closing cost home >equity refinance.” A woman caller asked about this and the host >said she should consider one; and her situation was that she only >had a principal now of about $17k, with only about 42 months >left on it, with an interest rate of 7%. He said something about >her being able to get a refi at around 4% at present, and something >about it probably staying at that level for most of the time she >had left, with it possible going up later, etc.
Answer: I think you figure incorrectly. If you don’t start calling lenders, you don’t know what it will cost.
We recently did a home equity refinance. What happens in essence is that you take out a home equity loan and use the proceeds to pay off your present mortgage. Total costs were $75 – no points, no other fees. For that, we dropped about 2.5 years on the remaining term (from 12.5 years to 10) and knocked a few bucks ($10-$15) off the monthly payment.
If you can’t get low or no fees and closing costs (not fees and costs added into the mortgage) and reduce the payment and/or decrease the term, it’s probably not worth it. We looked into refinancing two or three time before this – every time the interest rate was lower than on our first mortgage, but after fees and closing costs were added in, the total we would have paid over the remaining term was higher than if we did nothing.
Related Posts
Filed under: Home Equity Loan
Leave a Comment
XHTML: You can use these tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>
TrackBack URL | RSS feed for comments on this post.