How much do interest rates have to drop to justify a refi?
Rates are down and for some, believe it or not you may want to refi. Here is the easy test and a learning exercise. The test: How much can you lower your payments without paying any money to the lender and without adding to your mortgage.
Point #1: If you can lower your payments $50.00 per month or more you might want to do the refi. Just remember you reset your 30 year period this way. It is possibly worth it to you though.
Point #2: One learning experience - The lender can get a rebate to pay all of your closing costs. Taxes and insurance are not closing costs, you would have them even if you were to not borrow.
Point #3: Learning experience - If you pay for closing costs you should expect a lower rate of course.
point #4: Learning experience - Tricky Dicky loan officers like to slide past you they are raising your loan balance. I would think no one would let that get past them. Yet someone came to me a while back as he had been suckered into this trick. He ended up paying 4 points to a high pressure lender. He fell for it because he wanted some cash out and let his hunger for that clouded his judgement. He discovered they trickery at closing and still closed. He had committed to wife and self what the money was going for. It was a terrible decision. Consider if you are allowing a lender to collect 4 points in fees and rebates that you have joined the Santa Clause Club and the gift is going to the loan officer. You just bought his wife a new diamond ring a ding.
Sorry, this stuff really ticks me off. I couldn’t talk this guy out of this decision.
Back to point one, if you are willing to go through the effort, I say save the $50.00 per month every time you can.
Larry Cragun…..
