Real Estate (MP) For most owning a home is their biggest investment. But, until it’s paid off it should go into your debt or liabilities column in the portfolio. Why? Because you still owe the bank. So, a smart thing would be to refinance your home mortgage and if done right it could make you $40,000 or more. Let’s find out how? Home mortgages are at their lowest in four decades. If your mortgage is more than one percentage point above the current rate, and you expect to stay in your home for three years, think about refinancing now. Check out the current rates at your bank or at a website.
Do the Refinance Math
Say your mortgage is 5.5% on a $100,000 balance for a 30-year loan (includes taxes, insurance, PMI). Your current monthly payment is $852. You should be able to refinance at 3.92% — or lower.
At 3.92%, the monthly payment on a $100,000 loan for 30 years drops from $852 to $774. That’s an immediate savings of $130 per month and 15,060 per year. Over 30 years, that’s $46,800 you keep in your pocket instead of paying it to your lender. Now if that’s not making $46,000 –you might want to think again.
How to Do It:
Begin by contacting your current mortgage leader. You’re a valued customer –you’ve paid on time and they’re making money off the monthly interest. Your lender should be willing to make some concessions to keep your business. Then contact at least three other lenders: Banks, S&Ls, mortgage brokers, and credit union. Tell them you’re willing to transfer all your financial business, including credit cards, to them to win even more concessions.
Things to Consider Before You Refinance:
You’ll be paying closing cost again. There are application fees, title search, you know the process. That can total more than $1,000, or more. That’s why refinancing seldom makes sense if you’ll be moving in less than three years. You want a new mortgage long enough so your savings offset any closing costs. But, if you’re going ahead —
1. Shop and bargain hard for the lowest closing cost possible. Don’t be afraid to ask for lower closing costs. And don’t let your lender make you pay points either.
2. Ask for a “roll-in” mortgage: These are closing costs added to the mortgage balance and paid off over the life of the mortgage.
3. Don’t accept adjustable-rate mortgages unless you don’t plan the be in your home long. Your best bet is a fixed-rate mortgage, it locks in a low rate forever.
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