Archive for the ‘Rates’ Category

“Nate” asks:

Does it makes sense to refinance from a 6.28% rate to a 5.87% rate?

Nate:

There are a number of factors that go into figuring out whether it makes sense to refi, including how long you will likely stay in your home, and the amount of your closing costs.

To determine whether it makes sense to refinance, you’ll need to run a “break even” analysis to find out how long it will take you to recoup your closing costs. Then you will know how long you’ll have to keep your current loan before you start saving money. Your loan officer can do this for you, or you can try an online refinance break even calculator.

Of course, if your current interest rate is an adjustable rate, and you will stay in your house for a while, it may make sense to lock into a fixed rate anyway.

With the FreeRateSearch system, we use the same “rate sheets” that loan officers use to find out what loans are available to borrowers. We don’t have access to all the closing cost information, however. You’ll need to talk with your lender and ask him or her to provide you with a Good Faith Estimate, which includes closing costs, in order to run an accurate break even calculation.

With all the news about rate cuts recently, home loan borrowers may be wondering what it means to them. For some it’s good news, others won’t see an impact.

Here’s an excellent post that describes how the rate cuts may affect your loan. If you have an adjustable rate, you’ll need to know what index your loan is tied to. Don’t know? Ask your lender.

If you’ve been thinking of refinancing or buying, now is the time. In this crazy economy, you want to take advantage of a good thing when you see it!

“Jason” asks us:

My wife and I are contemplating refinancing our mortgage to payoff our credit card & auto loan debt. We are in the 1st year of a recent home purchase and have a loan balance of 154,500 @ 5.875% for 30 yrs. (fixed). Our current monthly payment is $913, and with the other debt added in, comes to $1325 monthly. Our credit card debt is $7,300 (paying $150 monthly), and the amount owed on the auto loan is $13,200 (paying $260 monthly). We plan on staying in our house for at least the next 20 years.

Jason: This is a great question. There are several things you need to think about here. First is the fact that you have a great 30-year fixed rate loan. I’d hate to see your interest rate go up and it very well could. Use our system to find out what’s available to you today.

Secondly refinancing will carry closing costs. If you opt for a “no closing cost” option, closing costs will be built into the loan and you will pay a higher interest rate. That could become more costly in the long run.

Finally, you may not have enough equity to do what you consolidate, pay closing costs, and keep your home loan balance below 80% of your home’s value, which is recommended in today’s market.

I’d recommend you do a couple of things instead. One is to get your FICO scores and if they are not as high as you would like, start working on getting them there. The higher your scores, the more negotiating power you have with creditors and the easier it is for you to get better rates.

Second, negotiate the lowest rate possible on your credit card. Call and ask! If your current issuer won’t budge, consider getting a card you can use to transfer the balance.

Third, look for any extra money you can to retire the credit card debt more quickly. Your payments are currently too small to make much of a dent in the balance. Track your spending to see where you can make some changes. Consider selling things you don’t need anymore on ebay etc.

Finally, given what you’d told me, if you really want to use home equity I would recommend a home equity loan or line of credit over refinancing the entire loan.