It’s hard to get a mortgage loan, however refinancing mortgage presently can make up more than 80 percent of home finance loan financing. Homeowners looking at such low interest rates want to refinance in hopes of either improving cash flow with lower payments or saving cash over time with shorter or longer terms. Whether they succeed accomplishing that with refinancing mortgage depends on such factors as interest rates and taxes. You will find also interesting differences in the outcome of refinancing via a 15-year or 30-year mortgage. Source of article – Mortgage refinancing – a number of methods to benefit from low rates by Personal Money Store.
Refinancing keeps mortgage financing alive
It is possible to save thousands of dollars in a year with lower monthly payments by refinancing a home loan. As reported by SmartMoney, more homeowners than ever are attempting to refinance their mortgages. According to the Mortgage Bankers Association, refinancing accounted for 80.5 percent of total mortgage lending. MBA records on refinancing activity from 1990 to 2008 average nearly half that percentage of home loan lending. As of Sept. 10, a 20-year fixed rate home finance loan averaged 4.51 percent. A 15-year fixed mortgage averaged 4.02 percent on the exact same date. During the exact same period last year average rates for 30-year fixed and 15-year fixed mortgages were 5.54 and 4.97 percent.
What makes refinancing a home loan advisable
Saving money with lower monthly payments is attractive, however not every homeowner should refinance a home loan. Saving a worthwhile sum over the life of the mortgage should be the primary goal of refinancing. Key numbers in the equation that have to be nailed down are closing costs and monthly savings. The time span for breaking even is determined by dividing closing costs by the amount saved on payments per month. If a homeowners stays put that long, a refinance could work. From time to time taxes can fool uninformed refinancers. An essential detail that cannot be overlooked is the interest paid on a mortgage is tax-deductible. Closing costs usually conserve nothing over time, while interest payments do. At the exact same time, upping money flow by refinancing with a 30-year home loan results in more long term interest paid.
An example for long-term method
The obvious benefit of 15-year refinancing is lower total interest costs. However, Kathy M. Kristof at the Los Angeles Times writes that a shorter-term loan means a higher monthly payment. Homeowners who aren’t’ fazed by a higher monthly payment might do well to think about putting the money someplace else. Kristof uses a $300,000 loan as an example. A 15-year mortgage has a total cost of $399,420. Over 30 years that loan will cost $547,223. Yet the monthly payment is $700 less with the 30-year loan. All that monthly savings, pumped into a diverse collection of stocks—with a documented average return going back 83 years of 9.6 percent, would yield $279,305 within 15 years. Halfway to the 30-year loan, the proceeds could retire the $198,701 balance. That would leave $80,000 to play with. The projected return is in no way guaranteed. But chances are the strategy would net more within the long term than simply refinancing with the shorter term.
Further reading
SmartMoney
smartmoney.com
New York Times
newyourktimes.com
Los Angeles Times
latimes.com
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