Understanding If Refinancing for a Better Rate or Different Terms Is Right for You

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Understanding If Refinancing for a Better Rate or
Different Terms Is Right for You
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What Is Mortgage Refinancing?
The process of taking out a new mortgage and
using the money to pay off your current mortgage.
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Evaluating a Refinance

• Set clear refinancing objectives
• Review current loan documents
• Research available loan products
• Add up costs and benefits

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Reasons to Refinance

• Save money on interest rates
• Lower your monthly payments
• Convert one mortgage type to another
• Build equity faster

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Refinancing to Save Money on Interest Rates
100,000 fixed-rate mortgage, 30-year term
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Break-Even Point
How long it would take to recoup the total costs
of refinancing, including closing costs, fees,
points and prepayment penalties
Total Cost ? Monthly Savings
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Refinancing for a Lower Rate with a Longer Term
100,000 fixed-rate mortgage, 30-year term
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Refinancing to Lower Payments

• Extend loan term
• Convert to interest-only loan

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Refinancing to Change Loan

• Refinancing to eliminate the risk of a
  fluctuating interest rate
• Refinancing to eliminate a large balloon payment
• Refinancing to improve terms on a second mortgage

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Refinancing to Build Equity Faster
100,000 fixed-rate mortgage
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Important Considerations

• Personal Considerations
• How long do you plan to stay in your home?
• Are you anticipating any personal or financial
  changes in the near future?

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Important Considerations

• Financing Considerations
• Are rates lower?
• How will refinancing affect your payments
• What are the costs of refinancing?
• Does your lender offer perks?

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Important Considerations

• Equity Considerations
• How much home equity do you have?
• How will refinancing affect your home equity?
• What is the trend with property values in your
  area?

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Important Considerations

• Other Considerations
• How will refinancing affect your tax deductions?
• Do you have a second mortgage?