Mortgage Calculator Refinance

You open your mailbox and find two mortgage refinancing offers waiting to be opened.  They both sound great. Maybe it is time to think about refinancing that mortgage. Wait!  Not every refinancing is a good idea.  If you choose the wrong broker; the wrong loan and the wrong terms you could find yourself losing money from the deal – or worse!

There are several things to watch out for when refinancing your current mortgage loan.  Here are just a few:

If the current interest rate on your mortgage is 8% and you get a notice saying that you have been preliminarily pre-approved for 6.5%, you might be tempted to jump at the deal. Hold on a minute!  Maybe you can strike a 4.6% deal with another lender.  Take a look at the current interest rates in your area.  You may be surprised to discover that they are much lower.  Go online or pick up the phone and start asking what lenders are charging for 15; 20 and 30 year refinancing loans.  The best deal is the absolute lowest rate; no matter what you are paying right now.

Trying to soothe upset homeowners who have managed to stave off financial troubles over the last few years and kept paying their mortgage faithfully despite a rocky economic future, many lenders are now approaching their customers with cut-rates on mortgage refinancing.  In many cases, even getting a 1% interest rate cut can be a good deal.  But ask about the length of the loan term because in most cases, the lender is requiring the borrower to take a 30-year loan.  Now, if you are only a few years into your mortgage, that may make financial sense, but if you are in year ten or more of your mortgage, why would you pay all of those closing costs to refinance a loan that is one-third to one half paid off to start all over again?  The interest they earn on those extra years will cost thousands more than you will ever save on that lower monthly payment.

Unless you can refinance for the same amount of years left on your current loan (or even less), the odds are good that the only one making money on your refinancing deal is the lender – not you.

Remember, when you refinance your mortgage, you are actually taking out an entirely new loan which will be subject once again to all of those losing costs include when you first purchased your home.  Since these costs must usually be paid upfront, you will be forced to come up with $3,000-$10,000 just to contain that new loan.

Be sure to carefully review all of your new loan terms when refinancing. What is included in your original mortgage documents may not be included in your new ones.  If you do not understand exactly what your new mortgage entails, your decision to refinance could be a bad one.

When you refinance your mortgage, the odds are good that the lender will require you to close out any existing equity lines of credit. That means that if you owe $20,000 on your equity line, you may have to pay it off in order obtain the new loan. Plus, you will no longer have access to those funds.  If you are one of the many homeowners who use an open equity line as an emergency fund, that fund is suddenly gone.  

The rules of mortgage lending have changed dramatically over the last few years. That means that some people no longer even qualify for their loan.  Just because you currently hold a mortgage for $250,000 does not mean that your bank (or any other) will approve a $250,000 mortgage refinance – even if you have faithfully paid your bill each month.  Be sure that you understand the limitations now placed on borrowers before applying for a mortgage refinance.

One of the biggest refinancing dangers these days is working with an unscrupulous broker who is not out to help his clients find the best mortgage deal, but to make money himself.  Be sure to check out any broker you consider carefully and ask to see a variety of mortgage lending options (from several different lenders) before making a final decision.  If your credit rating remains high and you have sufficient equity in your home, you should have the ability to choose form several lenders and loan options.  Any broker who fails to give you these options is likely not working in your favor.

Refinancing a mortgage these days takes more work and consideration than ever before. The good news is that if you are careful and take your time to fin the right deal you can save thousands of dollars over the life of your loan and maybe even pay your home off earlier than expected!