I continue to get calls for refinancing. A lot of people who were eligible for HARP (Home Affordable Refinance Program) refinancing have already done so. Hopefully, if they haven’t yet they will do so and take advantage of what I believe is a great opportunity for negative equity clients. But, there is renewed interest in other refinance programs because home values have rebounded in many markets.
Homeowners who have equity in their homes can do a regular refinance without HARP and lower their rate or they can get out of their FHA Mortgage Insurance Premiums to possible lower conventional premiums or they are opting to reduce the term of their mortgage.
A client should consider what their goal is with a refinance:
• Do they need to lower monthly payments and/or interest rate?
• How long will they be in the home?
• What are their long term wealth management/ equity position goals?
• What are the tax benefits or ramifications of a refinance?
• Do they want to build equity and lower rate?
An example of an analysis between staying with a current 30 year fixed loan Vs. a 15 year or 30 year refinance is outlined below. Please be advised this is not a rate quote. :
Say for example, you have a 30 year loan taken out for $150,000 with a rate of 5.25% 5 years ago. You have a balance now of about $140,000. The loan over 30 years would cost $150,000 in interest charges when finally paid back. The monthly P& I payment is $828 a month.
The same loan refinanced today with a $140,000 loan amount for a 15 year loan at 3% will have total interest paid of $36,000 over the term and the payment will only rise by $139 a month. HUGE savings!
The other alternative is to take the $140,000 and refinance for 30 years again at a rate of 4%. The loan will cost over the 30 years $102,000 in interest charge and the payment will drop by $160.
Wouldn’t you rather have the extra $100,000 in another form of investment or have your home paid off when you retire or when the kids go to college? Rumor has it 15 year loans have payments that are not manageable. It is not true. Speak to a mortgage professional about your options and don’t completely rule out a 15 year mortgage. It can change your life. For more information or to comment please contact me at Ingrid.Quinn@cobaltmortgage or visit my website at http://www.ScottsdaleMortgageExpert.com.