If you are considering a new home loan there are a number of mortgage refinance options available today that allow you to lower your monthly payment, even consolidate your higher interest debt, keeping more cash in your monthly budget. The only problem with today’s mortgage refinance options is the number of people trying to make a quick buck at your expense. Here are several tips to help you evaluate your options while avoiding unnecessary markup and junk fees.
Mortgage Refinance Options
Most homeowners refinance their mortgage loans to get a lower mortgage rate and a lower monthly payment. While this is one of the most common refinance options available there are a number of other reasons to refinance even if you can’t get a lower mortgage rate. Consolidating high interest credit card debt is another popular mortgage refinance option that can save you a lot of money considering how much the ridiculous credit card companies have jacked up their interest rates during the recession. Refinancing your mortgage and taking cash back from your home equity to pay off and hopefully cut up your credit cards could result in a slightly higher mortgage rate; however, it would still be much lower than the criminally excessive 20% or more charged by many credit card companies today.
If debt consolidation using mortgage equity isn’t one of your goals you might wonder if mortgage refinancing is the right decision. Ever hear of the two percent rule of mortgage refinancing? The two percent rule of mortgage refinancing states that you should not considering refinancing unless the new mortgage rate is at least two full percent lower than what you’re currently paying. This is one of the bits of most commonly quoted bad advice that you’ll encounter as a homeowner. Instead of basing your decision to refinance on an old wives’ tale, it makes more sense to base financial decisions regarding your home on a cost vs. savings basis.
How to Decide if Mortgage Refinancing is a Good Decision
It’s going to cost you money to refinance your home…this can’t be avoided. Application fees, rate lock and origination fees and closing costs await you should you decide to refinance your home loan. Some of these fees are blatant mortgage junk fees that savvy homeowners can easily avoid. Don’t worry if “financially savvy” aren’t two words you’d use to describe yourself, the free mortgage videos on this website will show you how to cut $1200 worth of fat from your mortgage loan every year.
Getting back to your decision to refinance, there is an easy way to decide if mortgage refinancing makes sense for you, assuming your goal is to save money with a lower payment. Simply add up all of the costs associated with refinancing your home loan found on your Good Faith Estimate and divide by how much lower your monthly payment will be on the new mortgage. Here’s an example to illustrate. Suppose your current mortgage payment is $1,400 and refinancing will get you a lower payment of $1,100. The estimated fees and closing costs for the new mortgage total $6,500. The difference in your mortgage payment will be $300 and with that savings it will take you just over 21 months to recoup your closing costs before you realize any benefit from the new mortgage. If you can live with this timeframe then mortgage refinancing makes sense. Keep in mind that getting a lower payment isn’t the only mortgage refinance option available and there are situations where refinancing with a higher monthly payment makes just as good financial sense.
What About Mortgage Junk Fees & Unnecessary Markup?
Like anything else you purchase there are people trying to take advantage of your mortgage to make a buck. As we’ve all learned banks are greedy shameless institutions that exist solely to take your money. The same is true to a lesser degree of nearly every financial advisor and mortgage broker you’ll encounter when exploring your mortgage refinance options. What you need is a clear roadmap for avoiding unnecessary mortgage rate markup and junk fees used by banks and mortgage brokers to boost their profits at your expense.
Did you know that most mortgage brokers mark up the mortgage rates they quote to collect a hidden, second commission from your mortgage lender on top of the origination fee you’re already paying for arranging your home loan? Banks have the same hidden profit margin built into their mortgage rates and your Good Faith Estimate is full of junk fees that serve no purpose other than lining your loan originator’s pockets at your expense. How can you avoid unnecessary mortgage markup and junk fees when refinancing your home loan? Check out my free Underground Mortgage Videos and I’ll show you how to save as much as $1200 per year by cutting the fat from your mortgage loan.
You can learn more about your mortgage refinance options without paying unnecessary markup or junk fees by checking out my free Underground Mortgage Videos.
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