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Marty Pfeiffenberger

What Rule of Thumb?

Wednesday, June 1, 2011 - Article by: Marty Pfeiffenberger - Maple Tree Funding - Message

"Should I refinance my mortgage?" - That is a great question that we in the industry like to follow-up with another question: "What are your goals?"

When you are considering a refinance of your mortgage, there are many factors to look at. Some of these factors include:

? Lowering your monthly payment

? Lowering your interest rate

? Reducing your term (30 year to 15 year)

? Saving the most in total interest over the life of the loan

? How long you are planning to stay in your house

? Possibility of an Adjustable Rate Mortgage (ARM) (5 or 7 year)

? Taking Cash-out

? Monthly Mortgage Insurance

Some of the old "rules of thumb" were that you must lower your interest rate by at least one point, while others say it must be two points lower... With today's changes in Mortgage insurance it is possible to actually reduce your mortgage interest rate and raise your monthly payment! With increased monthly mortgage insurance factors, a person can lower their interest rate and end up paying more per month due to these factors. That's not very helpful!

Let's say you can refinance your mortgage and save $200/month. That sounds like a no-brainer... however, if you have plans on selling your home over the next few years, the refinance probably will not make sense. Factoring closing costs, your breakeven point may end up being 3 or 4 years and if you sell after 2 years the refinance most likely wasn't worth it.

Just recently, I refinanced a client who had 24 years left on his mortgage into a 15 year mortgage and his rate dropped over 3% (his rate was over 7%). His payment went up roughly $50 per month but he knocked off 9 years from his mortgage. When we reviewed his total interest savings, it accumulated to over $100,000 over the life of the loan. Since my client planned on staying in his home for the foreseeable future, this option was just what he wanted.

For a client who has an extremely high interest rate that isn't sure of where they will be in the next five years, a low rate adjustable rate mortgage (5 or 7 Year ARM) may be the best option.

The point is... there is no more "Golden Rule" or "Rule of Thumb". Each client's profile is different and each client's goals are different too. Whether you are looking to save money monthly by reducing your rate, lowering your term to save on total interest and finish paying of your mortgage sooner, to taking cash-out to pay off credit cards or other debt, the rule of thumb should be:

Think Mortgage... Think Maple Tree

Simply give us a call or email us and let us know what you are trying to accomplish. One of our licensed professionals will review your profile, review the goals you want to accomplish, and present the best options for you. There's no upfront fee or fees for quoting you or giving you options... We compile the data and show you the results... if they match your goals, then we will start the refinancing process, if they don't, we can re-evaluate your goals later on down the road. We build lifelong customers and our goal is to be your first choice for refinancing or home purchasing needs.

Thank you,

Maple Tree Funding

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