I can tell you that I bought my house in 2004 and got locked in at a rate of 4.75%. When I tell people this, their faces drop! They are so impressed. I would highly recommend that you save as much money as possible and take advantage of this low rate! You will also become the envy of your friends and neighbors!
As far as cons, well, my best guess would be for you to look closely at your current credit rating to be sure you qualify, and I’m sure the paperwork will be a pain, but other than that, I think it would be wise.
Possibly worth investigating. If you are going to live in your house for at least 2 – 3 years, it might be worth it to you. It depends on how much your house will appraise for now and how much equity you have in it. I usually like to see at least a 1.5% lowering of the interest rate for me to consider a refi.
Cash-out refis are harder to come by now without a significant amount of owner equity in the home, so you are probably talking about a straight refi of the existing loan balance. Right?
You have to qualify for the new loan. So, if your financial situation has deteriorated since you bought the house, that may be an issue.
Your house will have to appraise for the new loan amount + 10 – 20% owner equity (new lender can tell you their criteria). If property values in your area have fallen, your house may not be qualify for a loan that will cover the balance of your existing mortgage loan + the costs to refi.
There are costs involved in refinancing a loan. You are essentially buying your house from yourself. So, there is a new loan, with fees and possibly 1% origination fee. Also an appraisal, title policy, closing costs from the closing company (title co or lawyer), recording the new lien, possibly a tax stamp (depends on your local regulations).
You may be able to roll all or some of these costs into your new loan. Or, you may need to pay them at closing.
Generally the lender refinancing the loan will want you to retain a percentage equity ownership in the property, so typically they will not refinance for the full 100% appraised value of the house.
4.8% is a phenomenal rate.
Here is what you want to do.
Decide how long you plan on staying in the home.
Take the total cost of the refinance and dived that by how much you will save to find your break even point.
Here is an example.
Refi cost = $4,000.00
Monthly savings with new rate of 4.8% = $128.78 ( I used a $200,000 loan amount @ 6% and then a new loan amount of $204,000 @ 4.8% to get this number )
$4,000 divided by $128.78 = 31.06 months divided by 12 = 2.5 years.
As long as you plan on staying for more than 2.5 years it looks like it makes sense.
New applications for mortgages for home purchases decreased 4.8 percent in the week ending February 16, 2007 according to the Weekly Mortgage Applications Survey from the Mortgage Bankers Association.
I can tell you that I bought my house in 2004 and got locked in at a rate of 4.75%. When I tell people this, their faces drop! They are so impressed. I would highly recommend that you save as much money as possible and take advantage of this low rate! You will also become the envy of your friends and neighbors!
As far as cons, well, my best guess would be for you to look closely at your current credit rating to be sure you qualify, and I’m sure the paperwork will be a pain, but other than that, I think it would be wise.
Good Luck!
bethrocks | Jan 5, 2009 | Reply
Save 20% down payment to get that rate.
20% down will also prevent you from paying that nasty PMI – throwing thousands away.
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Judy | Jan 5, 2009 | Reply
Possibly worth investigating. If you are going to live in your house for at least 2 – 3 years, it might be worth it to you. It depends on how much your house will appraise for now and how much equity you have in it. I usually like to see at least a 1.5% lowering of the interest rate for me to consider a refi.
Cash-out refis are harder to come by now without a significant amount of owner equity in the home, so you are probably talking about a straight refi of the existing loan balance. Right?
You have to qualify for the new loan. So, if your financial situation has deteriorated since you bought the house, that may be an issue.
Your house will have to appraise for the new loan amount + 10 – 20% owner equity (new lender can tell you their criteria). If property values in your area have fallen, your house may not be qualify for a loan that will cover the balance of your existing mortgage loan + the costs to refi.
There are costs involved in refinancing a loan. You are essentially buying your house from yourself. So, there is a new loan, with fees and possibly 1% origination fee. Also an appraisal, title policy, closing costs from the closing company (title co or lawyer), recording the new lien, possibly a tax stamp (depends on your local regulations).
You may be able to roll all or some of these costs into your new loan. Or, you may need to pay them at closing.
Generally the lender refinancing the loan will want you to retain a percentage equity ownership in the property, so typically they will not refinance for the full 100% appraised value of the house.
Shouldn’t cost you anything to find out, though.
Good luck.
A D | Jan 7, 2009 | Reply
4.8% is a phenomenal rate.
Here is what you want to do.
Decide how long you plan on staying in the home.
Take the total cost of the refinance and dived that by how much you will save to find your break even point.
Here is an example.
Refi cost = $4,000.00
Monthly savings with new rate of 4.8% = $128.78 ( I used a $200,000 loan amount @ 6% and then a new loan amount of $204,000 @ 4.8% to get this number )
$4,000 divided by $128.78 = 31.06 months divided by 12 = 2.5 years.
As long as you plan on staying for more than 2.5 years it looks like it makes sense.
Noneya | Jan 9, 2009 | Reply
You would save money each month, but your tax deductions would decrease. What is key is the appraisal.
Alterfemego | Jan 12, 2009 | Reply
New applications for mortgages for home purchases decreased 4.8 percent in the week ending February 16, 2007 according to the Weekly Mortgage Applications Survey from the Mortgage Bankers Association.
Average Rates:
30-year FRM: 6.19%, 0.88
15-year FRM: 5.88%, 1.03 points
1-year ARM: 5.81%, 0.88 points
The website below may provide some insight for you.
Good Luck…..!
Ray Smith | Jan 13, 2009 | Reply