April 15th, 2014 12:44 AM by Preston Ware
Here are some interesting scenarios that would indicate that you should inquire about a rate term refinance.
1.) You simply need to lower your payment.
Lets say your interest rate is 6.5% and the prevailing interest rate is
4.5%. That's a refi! Many customers have heard of the 2% rule. Usually,
unless it is a tiny loan, if you bring your payment down 2% it
justifies the closing costs of that mortgage. Actually that rule should
be called the 1% rule because many customers with larger loans will
benefit by just bringing their interest rate down 1%. Let's do the math!
You have to take into account how long you intend to be in the home.
Take the monthly savings and divide into the closing costs and see what
your break-even is.
2.) The No-closing cost loan.
Yes I can pay some or even all of your closing costs for you. Customers
always ask what are the closing costs. I say they are usually about
$4000 and they do not include your escrows of taxes and insurance. If
the prevailing rate is 4.5% at 4.75% or 4.875% I will be able to pay
closing costs for you. Ask me about this! On larger loans I can pay all
of the closing costs making it a free interest rate reduction. Free is
one of my favorite words and if I am lowering your rate 1/2 a percent
but I get you a free loan, that makes sense!
3.) The cash in refinance.
After we had a countrywide wake-up call after the mortgage melt down of
2007-2009 many clients decided to become more prudent and take the old
fashion approach of paying down their mortgage as fast as they can.
Please see the graph below.