Refinancing seems like the easiest thing in America right? I have a mortgage, I’ve always paid my mortgage and why wouldn’t I pay my lower payment, right? Well it’s not as simple as that for a few reasons:
- Your current mortgage was approved based on your personal finances that existed in the past!. We have to confirm your personal finances still meet the standards.
- The new lender doesn’t care much about the “old approval”. Even if it’s the same lender! The new loan has to follow the Fannie Mae/Freddie Mac/FHA/VA guidelines that exist today. Lenders have to vet everything for themselves, every time. So you are going to have to go through the process again this time.
- Before refinancing, you should look at two numbers. The first one is, what is the monthly payment savings from your current loan to a new loan of the same term? 30 year to 30 year for example. That will be your baseline savings. The second number is what does refinancing for less years look like monthly? Can you move to a 15 or 20 year loan from a 30? For the same or similar payment? It’s worth exploring as well. “Standard” refinancing can save you some money every month but term reduction, if you can swing it, can save you tens of thousands of dollars!
- How does cash flow work? Even if you pursue a “no cost” loan, money moves around for taxes, insurance and interest at every refinance closing. You need to understand this.
- What’s it cost? Refinancing runs about $2500 in today’s market. Who’s paying it and how? Also, how much will you save and how long will it take you to recover the cost of doing the loan.
This breakeven analysis is an important part of the decision to refinance!
We use some pretty advanced technology to help you make these decisions and understand the process. Our loan comparison and video summary tools make it easy to understand the answers to the questions above. Contact us about refinancing today!
