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Now Open: Golden Valley branch in Canyon Country
Tips for Refinancing Your Mortgage
Looking to reduce your monthly payments? Want
to switch from a variable-rate loan to a fixed-rate
loan? Those may be good reasons to refinance your
mortgage. Many times you can save money, but
there are also times when the costs to refinance
outweigh the benefits. Here are some tips for making
a good decision about refinancing.Tip #1: Determine how long it will take to make up the cost of refinancing. If you are looking to get a better rate but have upfront fees from the lender and the title company, your savings may be offset by the fees. Generally, if you can make up the fees within two years through a lower rate (and payment), it may be worth the cost of refinancing.
Tip #2: Be careful not to extend the term. If you have been paying on your 30-year mortgage for 10 years and go to refinance it for another 30-year term, you have just extended your payments 10 years. Match the term of your new loan to the remaining term of the old loan. For example, get a 20-year loan instead of a 30-year loan. In some cases, it may be better for you to keep your old loan. Tip #3: If you want to combine your first and second mortgage to get an overall better rate, make sure to calculate the sum of the parts. If your first mortgage has a good rate but the second mortgage (or line of credit) has a higher rate or a variable rate, you might be better off keeping the loans separate. It could be better to refinance only the second mortgage to a fixed-term rate. Consider this example: The savings are lost because even though the second mortgage rate is substantially reduced, the first mortgage rate increases. The payment actually increases.
This would save over $800 per year by refinancing just the second mortgage.
Tip #4: Read the fine print when signing the loan documents. Double check the interest rate and compare it to the rate you were quoted. Also, check to see if the closing costs are reasonable and in line with the estimates you received. Make sure there is no pre-payment penalty, otherwise paying off your mortgage early could be costly. Tip #5: Fixed for the long haul, adjustable for the short. Fixed-rate loan payments are typically higher than those with an adjustable rate, but the rate is guaranteed to stay the same for the life of the loan. So consider a 15-year or 30-year fixed-rate loan when interest rates are low and if you plan on staying in your home for five years or more. If you're planning to sell your home in the next couple of years, a lower-rate ARM (adjustable-rate mortgage) with lower payments might make more sense. At LFCU we offer Fixed, Adjustable, Jumbo and Super Jumbo loans. Visit your local branch or call us at (800) 328-LFCU. |
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