Loan Refinancing Center - Information for Home Owners

You may be considering the option of refinance your home for many different reasons. You can take cash out to pay for home improvements, consolidate your high interest debt, pay for college or a wedding, lower your monthly mortgage payments by getting a lower interest rate, or any need you may have. The important thing to consider when refinancing your home is if the cost of refinancing is worth the benefits you will get.

You may think that because you will have an $80 per month lower mortgage payment that you are already saving money when you refinance, but you need to consider the costs involved. When you refinance you are closing out your existing mortgage and creating a new mortgage. Thins means that you will have closing costs to pay for which include:

Any title fees involved in refinancing your mortgage.
Any legal fees involved with refinancing your mortgage.
Appraisal costs. When you refinance, the lender needs a current appraisal value in order to determine the value of your home so that they can decided how much cash out you can take or what percentage of the home you own in equity to determine what your new monthly mortgage payment will be.
The loan origination fee that the lender charges to handle all of the paperwork that is involved with the new mortgage loan.
Mortgage insurance premium. You may need to pay for mortgage insurance if you currently have mortgage insurance or if you take out enough cash from the equity in your home that your equity value falls below a certain percentage your lender may require mortgage insurance. If you have a FHA loan you must follow their guidelines regarding mortgage insurance, so make sure that you contact them before you refinance your home.

There are more fees to consider when you refinance, and once you add up all of the refinancing costs you should compare them to what you will save and figure out when you will break even with your home refinancing. For instance, if refinance at a lower interest rate in order to lower your monthly payments, you should take your monthly savings and add up how many total months it will take before you have saved the total cost of the refinance. If it cost you $5,000 to refinance and you save $100 a month with your new mortgage payment, then it will take you 50 months of saving the $100 before you pay for the $5,000 it cost you to refinance. After the 50 months you will start saving money. This means that if you are definitely going to stay in your home for over 50 months it would be good to refinance. However, if you plan to move in 3 years, 36 months, you will actually lose money if you refinance.

In the case that you are planning to refinance in order to take cash out of your home to pay for whatever needs you may have, you should also consider what it will cost you in the long run. You may need to pay for mortgage insurance if you lower your equity, plus all of the closing costs, and a higher monthly payment. Also be certain to look at the current interest rates so that you can take advantage of good rates when possible. If you can time your refinance well you can lower your interest rate and take cash out at the same time in order to keep your payment close to the same amount they are at now so the only cost to you would be closing costs.

Get more information on refinancing or a cash-out refinance.

Use a mortgage calculator to see how much money you can save with a refinance.