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Mortgage Refinance Information
Is Home Mortgage Refinancing Right For You?
A big question for a lot of people is "should I refinance my existing mortgage loan?" Well, unfortunately there is no easy answer to that question. Many factors have to be considered in making this decision. Here are a few of them:
- Why do you want to refinance?
- How long do you plan to be in your home?
- What is your tolerance of risk?
- Sample refinancing calculation
Why do you want to refinance?
Is it for monthly payment improvement? Shortening the term of your mortgage? Paying off consumer debt? You must identify your goals and reasons for considering refinancing first and foremost, and communicate these with your mortgage specialist.
How long do I plan to be in my home?
If you plan to be in your home for only a short period of time, you may not have time to make up in payment improvement what you incur in closing costs. However, Aliant Bank, a division of USAmeriBank, has some "no closing cost" mortgage refinancing options that may be right for you in this case.
What is my tolerance of risk?
With the hundreds of mortgage products available (such as interest-only products, ARM (adjustable rate mortgages) products, balloons, etc) you can readily obtain a relatively low interest rate. However, generally the lower the rate, the higher the risk. So, things such as age, job stability, possible relocation, etc. factor in to your tolerance for risk and help to determine which mortgage product would be right for you in your home mortgage refinancing.
Sample Refinancing Calculation - Determining Recapture Timeline
Here is an example of the thought process in deciding whether to refinance or not:
| A. Current mortgage payment | $1,800 | |
| B. Proposed new payment | $1,500 | |
| C. Monthly savings | $300 (A. 1,800 - B. 1,500) | |
| D. Closing costs | $4,000 | |
| E. Months to recapture costs | 13 (D. 4,000 / C. 300) |
So, in the scenario below, it makes sense to refinance if you plan on being in your home for 14 months or more. You can plug your numbers into the worksheet above to figure your recapture timeframe.
These are some of the major considerations in deciding whether or not to refinance. When armed with the right mortgage refinance information, you can make the best decision. Please contact a mortgage loan officer at Aliant Bank, a division of USAmeriBank, with any further questions you may have.
If we did not answer your home mortgage refinancing question, please contact us - we are happy to help!
All offers of credit subject to approval.
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