Maximize Your Refinance Loan Savings with the Truth about Mortgage Refinancing
With rates continuing at their historic lows, it’s a great time for many homeowners to refinance their mortgage loan down to lower rates and lower monthly payments. Before you jump into a mortgage loan refinance, become an educated homeowner by learning important fundamentals about refinancing your mortgage:
- What happens with a refinance?
- How do you save thousands during my refinance?
- Does refinance make sense for your situation?
It’s not as clear cut as many believe. Take for example this tip you’ll never hear from mortgage lenders…
Refinance Tip #1: If you’ve owned your home more than three years, NEVER replace a 30-year mortgage loan with another 30-year refinance loan — unless you are reducing your interest rates by at least 3% percentage points!
In fact, for many homeowners who’ve been in the same mortgage for several years already, a refinance is an awful idea! The only exceptions to this rule is if you’re cashing out (in which case, a home equity loan would be better) or trying to stop a foreclosure.
Think about it. If you’ve had a $100,000 loan at 5.00% the past four years, you’ve already paid more than $18,000 in interest over the past four years. By replacing your 30-year loan with another 30-year loan, you will have to pay that same four years again!
Even if you could drop your interest rate to only 3%, you would only end up saving $2,000 per year. It would take you eight years to make up the $18,000 you’ve already paid and are effectively losing — before you even see any benefits from the refinance loan.
Nevertheless, a mortgage loan refinance can actually work for many homeowners. This is particularly true if you need to pull cash out of your home equity and want more than offered by a personal loan or a title loan. Our free online resource center is dedicated to helping you get the most from your refinance loan — with the least amount of hassles and unnecessary closing costs.