OUR BLOG
MAJESTIC HOME LOAN

The Worst Advice We’ve Ever Heard About Refinancing



There are countless articles giving advice to homeowners about refinancing. But we thought it would be a good idea to recount conversations we’ve had that homeowners have related to us what they’ve been told in the past about refinancing. Here are some a few of those we’d like to share.

Rates must be 2.0% lower than what you have now before it makes sense to refinance. Okay, this is easily the most common as well as pervasive. You’ll still see this on various websites but it’s simply not true. Following such a statement can cost homeowners thousands of dollars. Instead, refinance to a lower rate and compare the monthly savings with the closing costs involved. If you can save enough to recover your closing costs in a couple of years, it’s probably a good idea to refinance. If it takes several years, it’s probably not.

Get the lowest rate you can by paying discount points. Discount points, or “points,” are a form of prepaid interest and lowers the rate on a loan program. Typically, one point will drop a rate on a 30 year loan by about 0.25%. On a $300,000 loan, that’s $3,000. A 0.25% reduction on a $300,000 note is about $42. If you divide $3,000 you paid by the monthly difference, that’s nearly six years. Not worth it. Don’t pay points when refinancing.

Refinance your loan so you can pull out cash to (fix the roof, build a deck, take a vacation). Not a good idea. Pulling out cash with a refinance should be an afterthought. If a refinance makes sense due to a lower rate or changing from an adjustable rate to a fixed, then pulling out some cash may not be a bad idea. But there are closing costs involved and if all you want is money to fix the roof, consider an equity loan instead, don’t refinance the entire mortgage just to pull out cash.

Pay attention to the rate, forget the term. While it’s certainly important to find out what rates are doing, even though rates might be lower if you refinance from one 30 year loan into another and you’re five or ten years into your current mortgage, you’re stretching your loan out another full 30 years when you’ve paid your mortgage down to 25 or20 years left.

WE CAN HELP
ACCOMPLISH YOUR GOALS.
  • LOWER MONTHLY PAYMENT
  • LOWER INTEREST RATE
  • REDUCE YOUR TERM
  • PAYMENT RELIEF
  • HOME IMPROVEMENT OPTION
Questions?
Contact us to get your questions answered.
LIVE CHAT
QUESTIONS? CALL US.
1-855-273-9890
 
1819 S. Excise Avenue Ontario, CA 91761
 
|
|
|

|
|
|
© 2018 R M K FINANCIAL CORP. DBA MAJESTIC HOME LOAN
NMLS CONSUMER ACCESS NMLS# 173946.