Refinancing and When does it Make Sense?!

[Girlzilla88]

So I keep getting a TON of ads to REFINANCE save XYZ I am assume it is just like with a Car and while it can help some people that have a higher apr lower their to actually help them save money they are offering me to go from a 3.87 down to a 3.2 or 3.3 or one claimed 2.625 but my thing is......What all goes along with Refinancing and would it really make that much sense to go from a 3.8 to a 3.3?!     I wouldn't even try it until my Mortgage Scores are back to where they were when I originally applied (So after I drop my UTL on my cards currently at 65% AGG) but I wanted to get you guys/gals advice because some people say you have to do a New Appraisal or put money upfront when refinancing etc and I honestly don't know how any of this works when it comes to a Home.      

[Girlzilla88]

Where are all my Mortgage Peeps at?!   XD

[FICOlearner123]

Is this a no closing cost loan?

How much does your monthly payment change from the intrest rate drop?

Do you plan to add the saving as additional payments?

[Girlzilla88]

@FICOlearner123      That part I don't know about the No Closing Cost part but it says 0 Lender Fee?!, but in the Ad it's different figures from different places so one is saying save a couple hundred bucks the other is saying I can possibly lower Insurance to help lower my payment as well.     I have been making extra payments here and there already but my concern is if it only drops 100 dollars a month (which I know still helps in the long run) but I have to pay 1k or 2k upfront I would rather wait a bit longer because I'm trying to pay off other things at this time...so I'm not sure if it even makes sense to do so at this point (well the point after I drop my UTL back under 30% lol)   

[FICOlearner123]

In any case try to see if your current lender is willing to reduce the rate, nothing to lose.

[Girlzilla88]

@FICOlearner123     I would definitely stay with my current lender I like them a lot actually.    I just want to better understand the process and what is expected of me since I've never refinanced a Home before.

[tcbofade]

Generally, you will pay for another appraisal and there is usually some sort of Origination fee for the new loan.

It costs exactly zero dollars to call your favorite loan officer and ask tho.  

[Girlzilla88]

@tcbofade     This is true I just don't want them whispering sweet nothings into my ear to make me want to App early and nothing can be helped or I pay for the Appraisal and I only save 20 dollars a month or something silly XD

[tcbofade]

You mentioned upthread that you were happy with your current lender... call them and ask them.

It won't do THEM any good to try to sell you a loan that doesn't work for you either.  

[NC_Mtg_Loaner]

Great question....

In order to conduct a refinance today a lender must prove that you the consumer have a net tangible benefit to refinance before it's even possible.  Generally speaking, as long as you will save 5% monthly, the NTB is met but there are other situations and circumstances too, but not nearly as critical as the 5% rule.

Nonetheless, with that being said if we knew what your principal balance was and your current rate, we could easily estimate your potential savings. 

However, in this economic climate, I've seen folks who bought homes in the last 10 years come forward and after further analysis most have been in a favorable position to refinance to a new 20 year loan w\out spending too much more than what they pay now thanks to the equity they've already generated combined with the lower rates on 20 year loans.   

Hypothetically though, let's say you have a $200k mortgage balance on your loan financed at 3.5%.  Refinancing to 3.0% fixed might only save $55 in principle and interest per month, but if you continue paying that "extra" $55 on your new loan you will pay that loan off in 325 payments as opposed to 360 payments.   SO even if you've already paid one year at 3.5% and have 348 payments remaining, refinancing can save you 23 payments of $898 or just over $20k, so it's definitely worth it in the long run. 

......Actual results may vary and it may be worth accepting a higher rate to cover closing costs or it may be worth investing 1% or more to "buy the rate down" and pay closing costs  upfront--the possibilities are limitless.