So you are thinking about refinancing. If you are in a fixed mortgage and have been in the mortgage for 3 or 4 years it may not make sense to refinance.
You have to work the numbers. Lets say you are going to save $50 a month, it is a no-closing cost loan, and you have been in your other mortgage for 4 years. So what you do is multiply your mortgage savings a month by the number of months left. So 26 years times 12 months a year times $50= $15,600 savings
But you are going to have a $200,000 at 5.75% and now you are back to 30 years. You have 4 extra years of mortgage. So what you do is multiply $200,000 times .0575 times 4 years= 46,000 in interest costs.
So sure you are saving $50 a month but you are adding on 4 years and $46,000 in interest.
That doesn't make sense financially.
If you live in Michigan and want to find out if refinancing is good for you email me at info@russravary.com For more Michigan mortgage articles and mortgage info feel free to go to my website www.russravary.com
Showing posts with label no cost loan. Show all posts
Showing posts with label no cost loan. Show all posts
Monday, February 4, 2008
Thursday, January 31, 2008
No-cost loans and how they work
How can people do a no-cost loan, there must be a gimmick. No cost loans are they for real? True No fee loans or true no cost loans are done by many mortgage brokers, banks, mortgage lenders. When you borrow money you usually have to pay appraisal fees, title insurance, title closing costs, bank processing fees, flood insurance checking. These fees add up to $1200 -$2500 depending on the bank and the size of the loan. So how can somebody do a no cost loan?
Here is how they work. Loan officers, banks, mortgage brokers make more money the higher the rate they sell you. For example at 4% they may make get 1% of the loan amount. So at 4.25% they may make 1.4% of the loan amount and at 4.65% they may make 2% of the loan amount.
So lets use the example above on a $200,000 loan. If your Michigan mortgage person does a 4% loan for you they make 1% of $200,000 or $2000 that is split between the company for overhead and the mortgage person.
Now if you have $2000 in closing costs they can give you a rate of 4.65%. They make 2% of $200,000 or $4000. They take $2000 of that money to pay the closing costs out of their pocket. That is how a no cost loan works. It is also how one bank or mortgage broker may have lower closing costs than somebody else. They are taking some of their commission to pay your closing costs.
Is it worth doing a no cost loan? Let's say you have a 5 1/8% loan on $200,000 with a payment of $1088.97 a month that you got last year. Your mortgage person offers you a 4.65% no cost loan with a payment of $1031.27 that does not cost you a dime or raise your mortgagebalance. You save $57.70 a month! You would save $20,772 over the life of the loan. It is a no brainer.
But let me play the devils advocate here. Why wouldn't you do the 4% loan? I this case I would if I had the $2000 in closing costs and I did not have to roll it in. The payment on 4% is $954.83 a savings of $123.04 a month which means it would take 16 1/2 months to break even. Are you going to stay in the house for over 16.5 months. Then it would be worthwhile to do the lower 4%. The payback time is different for every loan and every percentage rate.
You have to work the numbers when offered a no cost loan. Ask your mortgage person for the full fee loan too. Then make a decision after you run both payments and figure the payback time. Many times it is not worth it to refinance but it might make sense to reduce your payment if it does not cost you a dime.
For more on Michigan mortgages, credit scoring, and Michigan real estate feel free to go to my website www.russravary.com Have a great day!!! Russ Ravary
Here is how they work. Loan officers, banks, mortgage brokers make more money the higher the rate they sell you. For example at 4% they may make get 1% of the loan amount. So at 4.25% they may make 1.4% of the loan amount and at 4.65% they may make 2% of the loan amount.
So lets use the example above on a $200,000 loan. If your Michigan mortgage person does a 4% loan for you they make 1% of $200,000 or $2000 that is split between the company for overhead and the mortgage person.
Now if you have $2000 in closing costs they can give you a rate of 4.65%. They make 2% of $200,000 or $4000. They take $2000 of that money to pay the closing costs out of their pocket. That is how a no cost loan works. It is also how one bank or mortgage broker may have lower closing costs than somebody else. They are taking some of their commission to pay your closing costs.
Is it worth doing a no cost loan? Let's say you have a 5 1/8% loan on $200,000 with a payment of $1088.97 a month that you got last year. Your mortgage person offers you a 4.65% no cost loan with a payment of $1031.27 that does not cost you a dime or raise your mortgagebalance. You save $57.70 a month! You would save $20,772 over the life of the loan. It is a no brainer.
But let me play the devils advocate here. Why wouldn't you do the 4% loan? I this case I would if I had the $2000 in closing costs and I did not have to roll it in. The payment on 4% is $954.83 a savings of $123.04 a month which means it would take 16 1/2 months to break even. Are you going to stay in the house for over 16.5 months. Then it would be worthwhile to do the lower 4%. The payback time is different for every loan and every percentage rate.
You have to work the numbers when offered a no cost loan. Ask your mortgage person for the full fee loan too. Then make a decision after you run both payments and figure the payback time. Many times it is not worth it to refinance but it might make sense to reduce your payment if it does not cost you a dime.
For more on Michigan mortgages, credit scoring, and Michigan real estate feel free to go to my website www.russravary.com Have a great day!!! Russ Ravary
Wednesday, January 30, 2008
Fed drops rates again
The Fed drops it rate again, and it had no effect on the Michigan mortgage interest rates today. 30 year Mortgage interest rates are still below 6% but have not dropped dramatically for any length of time. Hopefully in the next month we will see rates slowly creep down. There are a lot of people out there that could use a break to get their adjustable rate mortgages changed into a fixed rate mortgage.
If you have an adjustable rate mortgage you should contact a mortgage person. They can check the value of your Michigan Home to make sure a bank will even loan against the house. Many homes have lost a lot of value making it impossible to refinance. Also the loan officer can put you on a watch list so when the rates do come down that you will be notified. It may make sense for your neighbor to refinance at 5 3/4% where it may not save you any money because you had a lower rate than he did before. You may need it to come down to 5 3/8% before it makes sense to do it. A No-closing cost loan may make sense for you. Email me at info@russravary.com to find out when it would make financial sense for you to refi and to be put on a rate watch list. For more on Michigan mortgages and Michigan homes for sale go to my website www.russravary.com
Have a great day. Russ Ravary
If you have an adjustable rate mortgage you should contact a mortgage person. They can check the value of your Michigan Home to make sure a bank will even loan against the house. Many homes have lost a lot of value making it impossible to refinance. Also the loan officer can put you on a watch list so when the rates do come down that you will be notified. It may make sense for your neighbor to refinance at 5 3/4% where it may not save you any money because you had a lower rate than he did before. You may need it to come down to 5 3/8% before it makes sense to do it. A No-closing cost loan may make sense for you. Email me at info@russravary.com to find out when it would make financial sense for you to refi and to be put on a rate watch list. For more on Michigan mortgages and Michigan homes for sale go to my website www.russravary.com
Have a great day. Russ Ravary
Monday, January 21, 2008
Lower mortgage rates this week
Hello Michigan,
Many people do not follow the mortgage market. Here is the latest update. Mortgage rates for 30 year fixed mortgages have dropped below 6% in the last few weeks. The people that this might be good for:
For people with adjustable rate mortgages this may be an opportunity for you to refinance and lock in a fixed rate. It may even pay to lock in a rate now if you are a year or two out.
For people who bought a home last year, mortgage rates are much lower right now. If you put money down you may be able to refinance and save money. You can even do a no-cost loan and save a substantial amount of money over the 30 years. It may not cost you a dime.
If you want to find out how much you can save or whether you can refinance to a lower rate feel free to call me on my cell at (313) 310-9855 or email me at ourmortgageguy@yahoo.com Feel free to visit my website at www.russravary.com for more mortgage information, or credit scores, credit info.
Many people do not follow the mortgage market. Here is the latest update. Mortgage rates for 30 year fixed mortgages have dropped below 6% in the last few weeks. The people that this might be good for:
For people with adjustable rate mortgages this may be an opportunity for you to refinance and lock in a fixed rate. It may even pay to lock in a rate now if you are a year or two out.
For people who bought a home last year, mortgage rates are much lower right now. If you put money down you may be able to refinance and save money. You can even do a no-cost loan and save a substantial amount of money over the 30 years. It may not cost you a dime.
If you want to find out how much you can save or whether you can refinance to a lower rate feel free to call me on my cell at (313) 310-9855 or email me at ourmortgageguy@yahoo.com Feel free to visit my website at www.russravary.com for more mortgage information, or credit scores, credit info.
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