Jan 9, 2010
What You Need To Know About Refinancing Before Applying for Obama Plan
Mortgage refinancing can help you save money on your mortgage payments. On top of that mortgage refinance can help you get cash, by tapping into your home equity. Before you take the steps and refinance your mortgage, find out about closing fees. Mortgage refinance costs money. Anyone telling you otherwise is trying to pull your leg, and there have been many cases of mortgage fraud, so be careful.
Closing costs for refinancing depend on the size of your mortgage and usually add up to 1.5% – 6% of the mortgage. Set aside some money if you plan on refinancing your mortgage.
Some lenders offer a “free” refinancing option, where all the fees for which you would usually have to pay are added to the mortgage balance. As an example let’s take a $200,000 with $4000 in closing costs. If borrower decided to add the costs to the loan, he would simply have to borrow $204,000.Paying closing costs upfront will cost you less in the long run, so do it if you can.
Mortgage Refinancing Costs
Legal Costs, Home Title Insurance, Points for the Broker / Agent, Appraisal, Survey Costs, Fees for Property Inspection, Home Insurance
What is the break even period and how does it work?
Break even period is a length of time it takes you to cover closing cost expenses, with the difference in monthly payments. Let’s have a look at one example. Assume a $200,000 mortgage, 7.3 % rate, 25 years term. The payment will come to around $1,438.07 every month (without insurance and state / federal / provincial taxes). If you refinance this same exact mortgage to a lower 5.1% interest rate, you will pay $1,174.62 per month, saving $263.45. Assuming our closing costs are $4000 dollars, it would take 15.5 month to cover $4000 with new savings, therefore reaching break even period.
Do not refinance again until reaching break even point, since you will lose money. Try to stick to your loan after refinancing for at least as long as is takes to cover the closing costs.
Learn more about: Obama refinance program over here: http://mortgage.freedomblogging.com/2009/03/13/who-qualifies-for-obamas-mortgage-refinance-plan/7653/
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