Looking to Refinance my home loan….Is it a good idea?

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I want to refinance, because of course, to get a lower interest rate and to have a lower monthly payment. (And now seems like the right time to do so). Right now, I have someone helping me paying my mortgage, but in a worse case senerio, if they leave, and if I don’t find a better paying job soon….u know where that could lead me, right? Anyhoo, before doing so, I did a little research and had a few questions in mind.
1) Is refinancing your loan like starting over, only with the currently amount you owe vs. the amount you purchase your home for over another 30 year stretch?
2) Also, I have an MIP on my loan, will this still exist if I refinanace again?
3) Are there any closing fees/any other hidden fees that exist during refinancing?
My current interest rate is 6.5%. I spoke with a friend and hers is 4.2%. Not bad at all. Anyhoo, refinancing sounds good, but it seems to me there are a few consequences. I plan on staying in my home for at least a good 10years or so…and also, the property value of the homes in my county are about to drop yet again. Is this another good reason to refinance, ’cause it seems to me that the loan amount that im paying now isn’t even worth/the value of my home.

As Always, Thanks!!!!

  1. Reply
    May 3, 2011 at 5:15 am

    1. Yes, a refi is starting over. However, if you go with a 10, 15, or 20-year term, that can be beneficial in terms of having an earlier payoff.

    2. You will have a MIP until your LTV ratio is 80:20.

    3. Yes, new loan, totally new set of closing costs. If you roll these into the new loan, the new loan amount is obviously more and the “break even” point is usually several years after you close.

    Property values have nothing to do with interest rates. You can’t refi for less than your current mortgage amount, unless Making Homes Affordable can do that kind of thing. If so, I am not aware of it. Property values have to do with Fair Market Value, or what the market will bear. This is a stressed economy, so naturally the housing market will be affected, and will rebound later, good Lord willing. Do no confuse FMV with equity. The amount of money you have invested into your home will have little to do with the FMV, or what the place would sell for in this market at this point in time. The market, like the economy, fluctuates.

    Planning to stay 10 years signals to me that a refi is a good plan for you, if you can save at least two points. I don’t know how long ago your friend got hers, and you may not be offered that rate, but it’s worth a try. Best Wishes!

  2. Reply
    May 3, 2011 at 5:46 am

    You need to make an appointment with a mortgage broker or bank and ask these questions. These

  3. Reply
    May 3, 2011 at 6:43 am

    This can be a good option for you this is one of the situation that i want to state for this “The intricacies of home sales in such a close knit group are often taxing on the members and their wards. It is to solve such wrangles and loopholes that individuals prefer to employ technically and legally adept agencies to aid them in making sales of domiciles”


  4. Reply
    May 3, 2011 at 6:47 am

    Yes, a refinance is starting over. You will have to take out your new loan for the amount that you owe on your current loan. You can do 30 years, or even 20 or 15. However, the fewer years you take, the higher your payment will be.

    MIP will exist until you reach 20% equity. The amount of equity you have depends on the market value of your home. This is why it can sometimes be difficult to get MIP removed, because it’s difficult to prove exactly when you reach 20%.

    You will have a new set of closing costs when you refinance. Fortunately, these will be the costs associated with obtaining the loan, and not things such as property taxes and insurance that you had when you originally closed. Your lender can give you an estimate of these costs.

    It’s great that your friend got 4.2%. However, I wouldn’t expect to get that because it’s possible her credit and debt scenarios are different enough to not allow you to, and it’s also possible that she locked in her rate when rates were at their lowest. I’ve seen them in the low 5s recently.

    If you plan on staying in your home for another 10 years or so, that’s a great reason to refinance. However I have also heard good advice that you shouldn’t refinance unless it’s going to save you at least $ 100 a month, because it makes the break-even point a lot farther away once you factor in having to pay the closing costs again.

    Refinancing won’t change whether or not your house is worth the amount of the loan you’re taking out. You’ll be taking out a new loan for the same amount you already owe. The only difference will be that hopefully you’ll get a lower interest rate that will lower your monthly payment.

  5. Reply
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    May 3, 2011 at 6:53 am

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