With interest rates so low, why isn’t the refinance decision a slam dunk?

Asked by Amanda Clifford, Miami-dade County, FL Tue Apr 30, 2013

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Debra (Debbi…, Agent, Livingston, NJ
Tue Apr 30, 2013
well - here's one reason it may not be a "slam dunk" - the property might not appraise out for the amount needed...........or............ the owner might not have the necessary income to qualify (lots of peopel lost jobs or took pay cuts)......or...........the owner's credit has been negatively affected by the downturn in the economy and they cannot qualify for a new loan........
1 vote
Where have you been Debbie?
Flag Tue Apr 30, 2013
Terry Farnsw…, Agent, Lisle, IL
Fri May 17, 2013
It depends on your situation and how long you are planning to stay in the home. Refinancing is not "free" - regardless of the advertisements you hear claiming "no closing costs" or "absolutely no fees". The fact is that there is absolutely no mortgage broker or lender in the world that will simply lower your interest rate, without tacking on some type of origination fee, olling that amount into your loan - raising your principal, or charging you a higher interest. They wouldn't make any money if they did.

If it's going to cost you $4000 to refinance into a lower rate, and knock $100 per month off your payment - you aren't going to "actually" see any of those savings and recoup the money you spent on that fee for over 3 years. If you are going to be staying in that house for the long-term, i.e. 10-15 years, then you'd be saving a fortune in interest and it makes sense. If you are uncertain about your future, and may sell the house and move in 3 years - then you would be actually losing money by refinancing in the long run and it makes no sense.

You'll want to shop around for the lower rates, and lowest associated "fees" before making a decision. Once you have an idea of the true cost, you'll want to crunch the numbers and make sure that the amount of reduction in interest, justifies any associated fees, in correlation with how long you plan to remain in your property.

Hope that helps!
0 votes
Debra (Debbi…, Agent, Livingston, NJ
Fri May 17, 2013
thanks for the best answer Amanda! (just noticed it!!)

Glad to have been of help!
0 votes
Yanoska Diaz, Agent, Miami, FL
Tue Apr 30, 2013
Even though property values have shown a significant increase in the past 12 months in Miami Dade County, there is still a huge number of properties under water. If a property is still worth less than what it is owed on the mortgage or there is no sufficient equity, refinancing is out of the question.

In addition, our market has been so volatile throughout the course of the past six years, those who may have the equity may just still be considering when would be the best time to make a move or which move to make regarding their real assets, whether selling or refinancing.
0 votes
Hi there! I have been around......just busy, though with a kitchen renovation - what a mess for 6 weeks! I hope by this weekend I will be able to start putting things back in place and maybe even get to use my stove!! I am sick of eating out or ordering in - never thought I'd say that! haha!
Hope all is well with you!
Flag Tue Apr 30, 2013
Meg Sahdala, Agent, Coral Gables, FL
Tue Apr 30, 2013
Players don't feel the game...

Ignorance is a big factor. I had several experiences that opened my eyes to this issue...

Aside from lack of knowledge, reasons might be different, to mention a few...

1.Property owner knows for sure he will be selling the property in a very near future, so doesn't need the headache of tons of paperwork and refinancing process as he will be out of the house in several months anyway.
2. Property owner is an elderly person and can't manage the process
3. Property owner has a little or no knowledge about the process and doesn't want to or is scared to take action
4. Property owner heard stories from friends and neighbors (stories which are not necessary true) and based on them makes wrong assumptions and doesn't take action
5. Property owner is in financial distress and cant afford closing costs on the new loan
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