Should You Refinance?

You’ve seen it, probably a few dozen times in the last couple days (and probably for the last few weeks). On the news, online, tv commercials, and probably a few other places.

Ohio Mortgage Interest Rates are at historical lows.

It begs the question, should you refinance your mortgage?

Most homeowners’ number one goal when refinancing their mortgage is to save money monthly. However, if you don’t consider all the factors in a refinance, you are wasting time and money.

Here are a few other things that you need to considered:

Ohio Mortgage Closing Costs

There are two components of the Settlement Charges that you will incur on a refinance. 1) Prepaids, which are the amounts for the daily interest which is dependent upon the day of the month your loan funds, and setting up your new escrow accounts. 2) Closing Costs, these are the costs that will change from lender to lender, broker to broker, broker to lender. They include underwriting fees, appraisal fees, title fees, application fees, etc.

Your loan officer can offer an estimate of the closing costs that you would incur on the refinance. This can be compared to other offers that you have received.

Many loan officers, myself included, talk about No Closing Cost Refinances. One thing to remember on a no closing cost refinance, is that you are financing the costs through a slightly higher interest rate. So technically you aren’t paying any closing costs at closing, but they are still there.

Terms on Your Current Mortgage

You need to consider how long you have paid on your current mortgage and how long you have left to pay. Why?

A homeowner that has paid on their existing 30 year fixed mortgage for 5+ years, probably doesn’t want to start back over by taking out a new 30 year fixed, losing those 5 years that have already been paid in.

Many lender will allow Ohio residents to refinance into a 25, 20, 15 year fixed rate, and a few even allow odd number years, such as 29, 28, 27, etc. year fixed rate mortgages.

How Long Do You Plan on Being in the Home

This comes into play with closing costs and calculating a breakeven point. For instance, paying $3500 in closing costs while saving $200 per month would necessitate you keeping that mortgage for 18 months before you recouped your costs ($3500 / $200 = 17.5 months). Generally if you plan on selling your home in the next 24 months, you probably shouldn’t refinance.

Credit Scores

Credit scores play a huge roll in Obtaining the Best Mortgage. Fannie Mae and Freddie Mac both have Loan Level Price Adjustments (LLPAs) that are calculated based on your credit score and the Loan to Value Ratio (LTV). Lower credit scores and higher LTVs can increase these LLPAs to the point that any benefit in refinancing is eliminated.

Equity in Your Home

See above, those Loan Level Price Adjustments (LLPAs) are impacted by your home’s value as that value compared to the amount of your new mortgage determines the Loan To Value Ratio (LTV). Higher LTVs equate to higher LLPAs.

These are just a few of the items that you should take into consideration when determining whether you should refinance your existing home loan. For a Free No Obligation Rate Quote complete the simple Rate Quote Form.