Property Manager MA: Is it worth refinancing your loan?
Refinancing may seem like a wasteful exercise but if done right, one can save around $200 or more every month. It is still a good idea to go for it even if the rates will go up further next year as money saved is a lot over the long run.
Refinancing will still cost you some money in the interim period. This means that you have to pay the closing costs which are around 2 to 5 percent of your loan amount. So this means a loan of $200,000 could cost up to $10,000 in closing costs. This can be avoided if your mortgage lender allows you to use a no-closing cost refinance. The only issue with that is that you will have to pay a higher interest. The only way that works is when you do the math. So look to see how much interest and repayments you would be making along with the closing costs. Then do it with the higher interest rate minus the closing costs. Go for the one which is mathematically cheaper for you.
Experts recommend that one use a refinance calculator to see if it makes sense to refinance. In the event that you want to stay in the home for two years and the breakeven point is four years, then it’s not a good idea.
Go for refinancing only if your interest rate is very high. Cutting it down will be the ultimate goal and quite useful. So when you know that you will be making a lot of savings over the long run, then go for it. The breakeven time will be over in no time and you will really benefit. No use going for a refinance if the cost difference is minimal.
Property Manager MA: Mortgage Insurance
Refinancing could also mean that you can cancel your mortgage insurance. However, this is only possible if you have a lot of equity in your home. Mortgage brokers say that the loan balance must be around 80 percent or less of your home’s appraised value to get this deal.
Refinancing a loan also means that you may be paying more interest instead of paying the principle. The idea is to reduce the interest and make the loan payment. So check out both options to see which one will allow you to pay it off faster.
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