Get the most out of your savings from a home refinance

Although lowering their interest costs is a primary objective of homeowners who refinance their mortgages, a number of other critical factors should also be considered in order to realize the greatest savings through a refinance.


The median household that does not refinance could lose out on an average of $11,500, according to the National Bureau of Economic Research. Besides the obvious lure of reducing the cost of your monthly payments, some other factors to keep in mind when refinancing are:


    1) The total cost of refinancing
    2) When you will begin to save money each month
    3) The length of the new mortgage term
    4) The new mortgage payment
    5) What to do with the monthly savings


To find out how many months it will take to pay off your refinanced loan, take the total cost of your refinance and divide it by the monthly savings after you refinance. Using a refinance calculator like the one at HSH.com can help you determine the length of time it will take before you can start to see a tangible savings.


Are you going to take a shorter or a longer term on your refinance?  Figure out how many years you can cut from your mortgage term by making your “old” payment on your newly refinanced mortgage. If your “old” mortgage has 25 years remaining, and refinancing at current rates lowers your monthly payment by $400 each month, then apply your old cost to your new monthly payment (i.e., prepay your mortgage an extra $400 per month) to see how soon your mortgage is paid off.  By paying an extra $400 each month, you could likely pay off your mortgage in fewer than 25 years. This could end up saving you thousands of dollars, at least.

source: smarterlifestyles.com

Obama Passes HARP and Helps Homeowners Save Huge

Obama is urging homeowners to refinance. Did you know that the President passed historic legislation that makes it easier for homeowners to refinance and saves them an average of $3,000/year?

The legislation is called the Home Affordable Refinance Program (HARP) and it does three really important things for homeowners.

1) Waives Refi Requirements

Obama’s mortgage program waives certain refi requirements for homeowners, making it much easier to qualify and take advantage of today’s still historically low rates. Some examples of requirements that have been waived are the need for an appraisal and credit score requirements. With requirements like these gone, millions of homeowners now qualify to refinance. The problem is people don’t know the program exists and they don’t know how much they could save by refinancing .

A free service that can help you see how much you could save by refinancing is LowerMyBills.com. You might be shocked at how much their network of lenders can save you.

2) Reduces The Amount Homeowners Owe

In his State of the Union, Obama told homeowners that if they refinance at today’s rates they could save up to $3,000/year. It’s amazing how many homeowners have sat on the sidelines, getting ripped off by banks as they keep paying mortgage rates in excess of 5%. If the rate you’re paying on your mortgage is above today’s historically low rates, you should  consider refinancing.

Think about how much money $3,000/year is over the life of your loan. If you have 25 years left, that’s $75,000. If you’re a homeowner, and you haven’t looked into refinancing recently, you should use this easy tool. It takes about 3 minutes to complete and helps you take advantages of today’s rates.

3) Pay Off Your Home In Half The Time

The President’s refi plan encourages homeowners to shorten their loans. Homeowners who switch from say a 30 year to a 15 year fixed rate mortgage not only pay their homes dramatically faster but they also get significantly lower rates. The savings for homeowners who opt to go this route end up saving huge. Savings can be as much as $805/mo.

Not only that, these homeowners are done with their mortgages altogether up to 15years faster. If you want to learn more about all the loan options available in the market, LowerMyBills can help you find out what would be best for you.

source: smarterlifestyles.com

Refinancing? Here are 3 Things to Consider

With interest rates near record lows, many homeowners want to refinance their mortgages. This can make sense, since it can mean that you save money over the life of your loan, or that you can improve your monthly cash flow (or do both).

As you refinance your mortgage, it’s important to think about your financial goals, and how your new mortgage can help you accomplish them. Here are 3 things to consider:

Cash Flow vs. Long-Term Savings

One of the first things to consider is the purpose of your mortgage, beyond getting a lower interest rate. Is cash flow important to you? Or are you more interested in long-term savings?

Look at your monthly income. Do you wish you had a little more wiggle room? If you are looking for money in your budget each month, refinancing can help, if you extend your term. A 30-year mortgage provides you with a lower monthly payment, allowing you the opportunity to breath a little easier – especially if you are worried that you might run into financial problems later.

On the other hand, you might be interested in long-term savings. This means paying off your loan as quickly as possible, even if it means a higher monthly payment. A shorter term at a lower interest rate can mean a savings of tens of thousands of dollars over the life of your loan. If you have the room in your budget, this can make sense. But if you will be stressed to make your payment each month, this might not be practical.

Getting the Best Interest Rate

When you refinance (or get any loan for that matter), getting the best possible interest rate is important. Before you apply for your refinance, check your credit to see if you need to improve your situation. If your credit score could use improvement, take a few months to fix problems.

Dispute errors on your report so that the mistakes are remedied. Make your payments on time. Pay down debt. Avoid opening new lines of credit. If you do these things, you will be able to improve your rate. You might also be able to pay points on your refinance to bring down the interest rate a little bit more.

Don’t forget to consider closing costs. If you can’t get a rate at least 1% lower than your current rate, it might not be worth it to refinance, since the closing costs might not be offset by your savings.

Documentation

Don’t forget to consider the documentation that you will need to refinance. You normally need to show that you can afford your new payments (especially if they are higher), and that you have the assets available to pay closing costs and other out of pocket expenses.

When I refinanced my mortgage earlier this year, I was required to pay off a small second mortgage that I got when I bought the house. This was an out of pocket expense that was considered in my refinance. I had to provide account information from my taxable investment account and my retirement account, as well as bank account information and PayPal income information. Find out what is required ahead of time so that you can avoid unnecessary delays.



Also, be aware of the timing involved in canceling your autopay with your old mortgage lender. Talk to your new lender about the timing, and try to coordinate so that you don’t end up missing payments. My new lender, Quicken Loans, was great about helping me properly cancel my autopay at the right time so that I was up to date on my payments before they paid off the mortgage.

Bottom Line

Remember that your refinance is a mortgage loan. You basically get a whole new mortgage to pay off the old mortgage. As a result, you need to be prepared to go through all of the steps associated with getting a mortgage. Prepare ahead of time so that you know how your refinance will fit into your long term financial plan, and so that you know what you need to make the transaction successful.

source: financialhighway.com