Rates on a 30 year loan are at historic lows. In fact the interest rate on a 30 year loan is lower than it has been in the past forty years. Along with this low interest rate comes gigantic opportunity for property owners to decrease their loan payments. Determining whether or not it makes sense to refinance is dependent on your unique situation, as well as how much money you will save in comparison to the new costs. The analysis is a relatively simple, but you should understand the procedure so that you can benefit from refinancing.

When trying to decide if refinancing your mortgage is a good idea, you first need to look at what you owe and how much you pay each month. Then you need to evaluate the costs and payment associated with the new loan. If refinancing will reduce your payment and not add years or significant cost, then the refinancing your mortgage makes sense.

The simplest way to see if updating your mortgage makes sense from a quantitative point of view is to list your current payoff, the number of payments left, and your current monthly payment. Multiply the number of outstanding payments by your current monthly payment and write this number down.

Under the previous number record the amount that you need to refinance, the period for the new loan, and the approximate mortgage payment. You can do all of these calculations quickly with a spreadsheet, or downloadable mortgage calculator. Make sure that you take into account the costs to refinance when doing your calculations, as well as origination fees, appraisal fees and transfer and escrow costs. Now repeat the same calculation as before, multiply the total number of payments by the monthly payment amount.

If you are not pulling out any equity during the refinance, the refinance makes the most common sense if you can lower your mortgage payment, and if the whole amount paid (number of payments multiplied by the monthly payment) after the refinance is lower than the entire amount to be due on your current note. If the mortgage payment is lower than your current payment, but the full amount is larger, you should decide if paying a reduced amount of monthly outweighs the greater amount you will need to shell out. The opposite decision is requisite if your payment increases but the overall amount due decreases. In both of these cases, caution must be used to be sure that you make the right decision.

One think to take into consideration as you go through the above analysis is that the current mortgage must equal the amount that you are refinancing. If the refinance amount exceeds the amount presently due on the mortgage then a much more complicated analysis is warranted. For this type of analysis, you will need a spread sheet with present value and amortization calculations. If you are not comfortable with these types of calculations, consult a financial adviser or accountant to assist with quantifying your decision.

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categories: real estate,real estate investing,refinancing,foreclosure,mortgage,realty,finance,short sale,short selling

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