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How many percentage points should lower your rate be for a refinance to make sense?

I was just wondering how little or much would make sense in terms of just the rate? Does 1/2 a point make sense? by TThorp_506_683 from Greenville, South Carolina. Jan 25th 2012 Reply


Lisa Boroughs (lisa.b_642_523)
#34 ranked lender in South Carolina - 1 contribution

Its depends on the size new loan amount and the terms in years of the old mortgage vs. the new mortgage. The higher the loan amount, the more impact the interest rate has. Please call me so we can discuss your individual circumstances.Lisa BoroughsWalker Jackson Mortgage843-296-8219 Cell866-686-9248 FaxNMLS 372536

Jan 25th 2012
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Joe Metzler (JoeMetzler)
#1 ranked lender in Minnesota - 4,078 contributions

There are no rules. The simple answer is that if it makes sense, do it. So what makes sense? Generally speaking, you simply calculate your monthly saving, Calculate the closing costs, then divide the cost by the savings. This will give you a breakeven number. Lets say that breakeven number is 2.5 years. As long as you plan on being in the home more than 2.5 years, it makes sense. Then of course, the longer you plan on being in the home over the breakeven period, the better it looks. One extra word of advice, be sure to calculate a cost loan, versus a no cost loan. You may be really surprised at the answers! In MN and WI, visit www.StPaul-Mortgage.com

Jan 26th 2012
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Bill Nisbet (billnisbet@gmail.com)
#19 ranked lender in South Carolina - 10 contributions

Yes. In many cases we can give you a lender credit to cover closing costs. That way you reduce your rate, but dont increase your balance. A no brainer.Bill 843-412-3414

Jan 25th 2012
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Hans Bruhner (Hans Bruhner)
#131 ranked lender in California - 122 contributions

That answer will be different for different people and different loan amount. I spoke to a client who was going to save $320 a month and he said it was not worth the hassle.......WOW! You just have to look at cost vs savings and see what works for you. I am in CA and do not lend in SC so this is straight advice: Just look at the numbers and if it makes sense then lock it in and get it done. The biggest mistake you can make is to wait for the rates to get better because if they don't then you just wasted your time and money and got nothing.

Jan 25th 2012
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Sharon Crowe (sgcrow_666_918)
#33 ranked lender in South Carolina - 1 contribution

The difference in the interest rate will not be the only thing to consider when looking into a refinance. Are you currently paying private mortgage insurance with your monthly payment? If so and you have owned the property long enough to have experienced some appreciation in the appraised value then that can also be a factor in whether the refinance will be worthwhile. I would be happy to run a comparison for you and discuss the advantages of refinancing. I may be reached at sgcrowe@southerntrust.com or 864-901-2703. Sharon Crowe, Southern Trust Mortgage, NMLS #202651

Jan 26th 2012
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Joel Lobb (kentuckyloan)
#3 ranked lender in Kentucky - 192 contributions

I think it depends on your break even analysis. If you can have the loan long enough to recoup the costs of the refinance you should pay more in points or closing costs

Jan 26th 2012
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William J Acres (William_Acres)
#73 ranked lender in Arizona - 8,727 contributions

FHA requires a 5% reduction in payment.. this is in place to prevent predatory lending practices, however conventional financing talks about Net Tangible Benefit.. Or payback period. If you pay $3000 in costs, and you save $100 per month, then you would take 30 months for the refinance to pay for itself. Most conventional lenders have a guidelines that states the NTB should have a breakeven point of 48 months or less. Contact a local mortgage broker, not a bank, and apply with them.. they can put together a "Total cost Analysis" and show you in writing if it makes sense or not.. WilliamAcres.com

Jan 26th 2012
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Bert Carpenter (BertCarpenter)
#1 ranked lender in Arizona - 1,849 contributions

The answer depends on more information than you provided. The larger the loan amount, the easier it is to justify a refinance for a1/2 % reduction in rate. The easiest way to decide is to determine the breakeven point. Let's say the cost of the refinance runs you $2,000 in to total costs (Title, Appraisal, Lender Fees, etc.) If the refinance lowers your payment $100.00 per month, then your break even is 20 months. If you plans are such that you intend to still be in this home (and loan) for more than 20 months, then it makes sense. Another possibility is if the 1/2% reduction is for a new loan that includes lender paid fees, then the breakeven is 0 months and you should do it. A loan that pays the closing costs using lender credits is commonly referred to as a "No Cost Loan" because the borrower is not paying costs out of pocket or by adding them to the new loan balance.Contact a local Mortgage Banker/Broker, rather than one of the big banks. Unlike a bank employee, who is most likely just an order taker, a Mortgage Broker/Banker is Trained, Tested and Licensed in all aspects of Mortgage Origination. He/She has access to loan products of many lenders, not just those of one bank, and can properly guide you. But more importantly, He/She is trained to take a look at the various different options available to you and guide you into the one that makes the best sense for your situation. He/She will be willing to do the calculations to show yo what your monthly savings, breakeven and costs are. This should help you determine if it makes sense for your situation.Don't forget to check out your selected Mortgage Originator at the National Mortgage Licensing System at www.NMLSConsumerAccess.org ~ Bert Carpenter, The LoansA2z team of NOVA Home Loans ~ NMLS 40586 ~ www.LoansA2z.com

Jan 26th 2012
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Matt Elston (Matt.Elston)
#4 ranked lender in South Carolina - 50 contributions

1% is the rule of thumb, but if you've got a large ($250,000 mortgage or more) or your getting a No Closing Cost Mortgage every little bit can help.Matt Elston, AgSouth Mortgages803-324-1131, ext 1

Jan 26th 2012
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