Many people get a mortgage loan, but they just make the payment every month without ever thinking that there are ways to save money. Discussing a mortgage refinance with your lender can help you save a little money each month on your mortgage payment, which adds up to a lot of money over time. So, how do you know if you should consider mortgage refinance?
1. Wave those fees
One consideration you need to make when thinking about mortgage refinance is that a small rate cut can bring you a fast pay off. Many mortgage companies today are waiving refinance fees for things like application, appraisal, and legal fees. The savings can add up to between $1,500 to $3,000. However, be careful of how much you will save in the outset and balance it by how much more you will pay overall. Sometimes companies will not give you the lowest mortgage refinance rate when they waive your fees.
2. Points Options
You may also want to consider paying points if you are planning to stay in your home for more than three years. A �point� equals one percent of the amount of the loan. If you pay points and closing costs, you will most likely get the lowest rate available.
3. Adding Points
Another option with mortgage refinance is to add the points and closing costs to your refinanced mortgage. You may only want to consider this option if you have had your mortgage for over three years, because then you have already lowered your mortgage by quite a few thousand dollars. This way you may add on the extra fees with points and closing costs, but your overall mortgage will still be smaller than before. With a new rate and a smaller total loan amount, your mortgage refinance will reap you a smaller payment each month.
Money Saving Tip #3: Pay Additional Points
A good way to save money on your monthly payments, even when you refinance your mortgage, is to pay extra points. If you pay extra points you can possibly get a lower rate on refinancing your Arizona home. This may work well especially if you have borderline credit. The lower interest rate will also save you money in the long term.
4. Good Rule of Thumb
As a rule of thumb, you should only consider mortgage refinance if your new mortgage will be at least 2 percentage points below your current rate. The exception to this general rule is when you are able to get a mortgage refinance that waives fees. With these low cost, or in come cases no cost, refinance program, it may be worth it to refinance with just a little smaller lowering of interest rates.
In the end, your total cost for mortgage refinance will be dependent on your interest rate, points, and other costs. Therefore, it is important that you shop around to find out which mortgage refinance program will work best for you. Do your research into each company to make sure that they are financially sound and provide good customer service, too. Then take advantage of the mortgage refinance programs to save you money each month on your mortgage payment.
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