Mortgage Refi Questions
Tips for Refinancing Your Home

Are you contemplating a mortgage refi? Let's face it, refinancing can be expensive. Friends ask me constantly if they should try to lower the interest rate on their home and how to figure a break even point. Maybe you are wondering this too.

To Refinance or Not to Refinance Your Mortgage

Hi my name is Kate Ford. I am the author and have more than 20 years of experience in mortgage lending. I understand that refinancing is not always the right decision, even when interest rates drop.

The following six questions and answers are inspired by a letter I received this week. After you're done reading, you'll have the opportunity to write me with your own questions.

But for right now, time's passing. Current mortgage interest rates are great and I don't want you to miss out. So let's get started, okay?

Mortgage Refi Question 1 - Save How Much?

Kate, The broker states I'll save money refinancing if I have the original survey, title, and my home owner insurance agents information.

Ask Kate: Whenever you hear It will save you money IF, ask HOW MUCH. $3? $30? $300? $3,000? Without knowing the actual amount, it's a meaningless proposal.

Here's more on title insurance at How To Get A Mortgage - Meet Your Title Insurance Companies

Mortgage Refi Question 2 - Cushions and Credits?

Kate, As the home owners insurance was factored into the initial closing costs when I first bought the home, would that reduce the new mortgage closing costs?

Ask Kate: When you purchased your house, did you set up an account for homeowners insurance and property taxes to be included in monthly house payments? You may have heard it called a cushion, escrows or the oldest term, an impound account.

Funds remaining in your insurance account and property tax account for that matter belong to you. They will be credited or refunded directly following closing.

Visit How To Get A Mortgage - Meet Your Home And Fire Insurance Agent to learn why insurance agents are important to real estate transactions.

Mortgage Refi Question 3 - Break Even?

Kate, I think I know the break even period for refinancing my mortgage, but I would rather get your insight.

Ask Kate: To roughly figure a break even point on your mortgage refi, divide the cost by the difference between your current mortgage payment and the new one. Then divide that amount by 12. That is one method of getting a yearly break even point.

Example: If your refinance will save you $200 a month but costs $5000, here is the formula. {$5000/$200}/12 months = 2.1 years to break even.

Mortgage Refi Question 4 - Where's My Money?

Kate, What happens with the amount I have already paid on my current mortgage?

Ask Kate: As long as your current mortgage is amortized meaning you pay both principal and interest, the mortgage balance is decreasing. Your current mortgage balance amount will be the basis for calculating a pay-off.

Example: Your $500,000 mortgage is down to $400,000 before you refinance. You pay $2000 in interest each month. Your mortgage pay-off will be around $403,000 because pay-offs are roughly equal to the current balance plus 30-45 days of interest.

The escrow company (not to be confused with escrow accounts) or lender will order your pay-off. Discover How To Get A Mortgage - What Is Escrow to learn about escrow.

Mortgage Refi Question 5 - Multiply What Again?

Kate, What do I multiply and divide to figure out my new monthly payment?

Ask Kate: Good news. No need to add, subtract, multiply OR divide. Here is my free and easy online home mortgage payment calculator where you can calculate and be as creative as you like with your mortgage payment. You can print your amortization schedule too.

Mortgage Refi Question 6 - Closing Costs and Fees?

Kate, Lastly what lines should I scrutinize on the new loan documents?

Ask Kate: In short, scrutinize all pages.

This guide to good faith estimates where I'll walk you though the fees Reducing Mortgage Closing Costs - Little Known Secrets will help knowing what to look for.

If you have more questions about good faith estimates, I hope you'll feel free to write me.

Ask Kate to Translate Mortgage Speak

Ask Kate is specifically designed to answer your questions and create dialog.

You'll also find a wealth of information at Kate's Best Mortgage Rate Blog packed with the latest additions to this website, interest rate updates and a fresh approach to home loans.

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