If you’re asking yourself the question “Should I Refinance” there are a number of things you’ll want to consider before taking out a new mortgage loan.
There is a lot of bad advice out there when it comes to this question and ultimately the answer for you is going to depend on your individual situation.
Here are several tips to help you answer the question “Should I Refinance” for yourself and avoid paying too much when you do.
Forget the Two Percent Rule
Whoever came up with the two percent rule of mortgage refinancing deserves to be tied to an anthill and doused with honey. Really. The two percent rule is a wives tale that makes no sense whatsoever if you approach the question “Should I Refinance” logically. First of all, the two percent rule of mortgage refinancing states you should not refinance your mortgage unless your new mortgage rate is two percent lower than your old mortgage rate.
There are many reasons for refinancing your home loan. Some people refinance to get a lower mortgage rate; however, others refinance to consolidate first and second mortgage loans or borrow cash from the equity in their homes. No matter what your reason for refinancing if you are comfortable with the consequences of taking out a new mortgage then mortgage refinancing is probably the right choice for you. So what exactly do I mean by the consequences of mortgage refinancing?
Should I Refinance… How Long To Recoup My Expenses?
If the inventors of the two percent rule had actually thought about what they were doing they would have said it makes more sense to base your decision to refinance on how long it will take you to recoup your expenses from refinancing, if at all. There are some situations where you will never recoup your expenses from taking out a new mortgage loan but if you can justify the expense and are comfortable with the consequences, mortgage refinancing still makes sense. If you are refinancing to get a lower mortgage rate and payment amount you’ll want to consider how long it will take you to recoup your origination fees and closing costs with your new lower monthly payment.
Calculating how long it will take to recoup your expenses from refinancing is easy: simply divide your total expenses by the amount you’re saving each month. This figure will give you the number of months it will take you to make up your expenses from refinancing. If you’re happy with the lower payment and the amount of time it’s going to take you to pay back your closing costs then the answer to the question “Should I Refinance” is yes. How ridiculous does the two percent rule of mortgage refinancing seem now?
How to Pay Less for Your Next Mortgage
Most people overpay for their home loans because they pay too much for the mortgage broker. Your mortgage broker deserves to be paid for their work; however, many brokers take advantage of their customers with hidden markup and junk fees. And you thought answering the question “should I refinance” was hard enough right? Fortunately you don’t have to be a financial guru to avoid being taken advantage of when refinancing your home loan. The information and mortgage videos found on this website saves the average homeowner $1,000 per year from this markup and mortgage junk fees.
You can learn more about answering the question Should I Refinance for yourself while avoiding markup and mortgage junk fees by registering for my Underground Mortgage Videos. Here’s a sample showing you how this hidden markup of your interest rate drives up your mortgage payment unnecessarily.
Register today and you’ll get instant online access to my mortgage videos without downloading anything on your computer.
My name is Rob Regehr and I’m a personal finance writer with a chip on my shoulder for banks and brokers that take advantage of my friends and neighbors.
