Rolling The Dice with Refinancing

: Chris Lee Law Firm

  Filed under: Mortgage Modification

Anyone who’s a homeowner has likely gotten a call from a mortgage broker raving about record lows in interest rates. The option and inclination to refinance your home is there, but is it worth it? Below are some questions you should ask yourself before you are lured with a miniscule rate.


1)     How much time have you put in? Refinancing resets the mortgage clock. If you refinance for another 30 year mortgage, then your mortgage starts over at year zero right then.

2)      How much equity are you losing? Resetting the mortgage clock also resets the interest balance. That means that all that time paying down the front loaded interest to get to the principle is also reset. Therefore, your payments will be mostly interest when restarting.

3)      What is the total loan amount? Most mortgage brokers will talk about reducing monthly payments the way a car salesman will “get you into this car for $x.xx per month.” Take a good look at how much you’re borrowing before you’re allured with lower payments (if you can already afford your payments).

4)      What are the closing costs? Refinancing can be very expensive. Likely the broker will offer to roll the cost into the loan so you pay zero out of pocket. All that does is finance your closing costs. After it’s all said and done, the closing costs may make the new loan more than you owe presently.

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