2. You should make sure you are not going to sell your home in the next 3-5 years.
3. You should "shop-around." Make sure you are not being charged excessive closing costs such as loan origination fees, etc.
It really does depend on your goals, current situation and the refinance packages that are being offered to you. The myth that you have to "save 1% from where you are now" is completely inaccurate. Time, costs and savings should be your guide and that is going to vary from borrower to borrower. Also take into account whether you have an ARM that is adjusting and you need the security of a fixed rate.
If nothing else, ask for a "no cost" refinance. In exchange for taking a slightly higher than market rate, many lenders will offer to pay your closing costs out of the spread of the loan. It is in essence the opposite of paying points for a lower rate. That way, if rates go lower, you can refinance again and it didn't cost you anything the first time.
Example 200,000 dollar current balance with a current rate of 5.5% and P and I payment of 1136. Offered rate 4.75% zero points with 3,000 closing costs and a new P and I payment of 1043. Recoup time on cost is about 32 months.
No Cost option 5.125% No closing costs and a new P and I payment of 1089. Savings of $47 per month with NO RECOUP TIME!
Of course this is a very elementary example and I did not factor in amortization differences but those differences would increase per month savings. Also, I didn't factor in the cost being rolled back in the loan but that also would make a no cost more attractive especially for someone who is hoping rates may come down further or that they may be leaving the house in a few years possibly. Its a great hedge.
I hope this helps.
It might be. It really depends on your individual situation.
I see you're from the Grand Island, Nebraska area. The best way to find out is to talk to a lender who works in your local area. You may also want to talk with a real estate agent there as well. They know your market, and where it's going.
It's important to keep two things in mind:
First, when you refinance, the new lender is loaning you money to pay off the current mortgage. So the home must be worth enough in the current market for you to do this. If you don't have much equity in the home, and your market has dropped, refinancing could be difficult. That's why you might want to talk to a real estate agent first to see if refinancing is even feasible at this time.
Next, when you apply for a mortgage, a bank, or other lender, is looking at your overall financial picture--your assets and liabilities, as well as your credit score, and your debt-to-income ratio. If you're now carrying more debt on your credit cards, for example, you may find that your credit score is lower than the last time you got a mortgage, and may keep you from qualifying for the best available rates. You'll want to see a big enough improvement in your rate (and monthly payment) to make refinancing worth doing.
There are many people for whom refinancing right now is a great idea. Perhaps you're one of them. Good luck.
Maggie Hawk, REALTOR
Watson Realty Corp.