How to Know If It's Worth the Cost to Refinance

[Jun 30, 2009.]

 

Refinancing is an opportunity that, like most opportunities, has a cost attached to it. Closing costs due and payable from the refinance borrower on a $400,000 loan can run up to $7,000 including any "points" paid to a mortgage broker or lender. Such costs are typically then tacked onto the mortgage balance.

During the housing boom, the tacking on did not seem like a problem. After all, housing prices were rising much faster than $7,000 per year, and refinancing was as easy--and American--as apple pie.

Now, though, home refinance has reverted to being a real decision, complete with pro and con lists and cost and benefit analyses. Fortunately, a new report from the Mortgage Bankers Association provides some excellent information for borrowers trying to decide whether or not it's worth it to refinance.

Reading the Full Report Is a Good Idea

For borrowers considering a refinance, it may be worth the time and effort to just go ahead and read the full report, titled "A Financial Analysis of Consumer Mortgage Decisions." It's available for free here.

It's also 60 pages long, though, and written by "mortgage people."

Cool Tool Alert: The Optimum Mortgage Refinancing Calculator

For refinance hopefuls that want to bypass the full report, there are some great tools available as a result of this important study. For instance, the "Optimum Mortgage Refinancing Calculator."

This calculator gets right to the heart of the question so many borrowers are asking these days: is it really worth it to refinance? By taking into consideration closing costs, discount points, old loan repayment term, new loan repayment term, old interest rate, new interest rate--

Well, suffice it to say that the calculator is more complex than it seems. But extremely easy to use. And unlike many mortgage brokers, it actually gives you a straight answer!

There are a number of sites on the Internet that have good mortgage calculators, but this one, put out by the Mortgage Bankers Association itself, is particularly helpful for those looking to make an informed decision.

Now Read the Full Report. Please

Good tool, right? Now go ahead and read the full report. Seriously. It's informative.

Refinancing is not as simple as it used to be. Borrowers need all the knowledge they can get.

After reading the report, go here to see your refinance options. Keep the Optimum Mortgage Refinancing Calculator handy to see which opportunities may be worth the cost.

 

About Author:

Andrew Freiburghouse is a writer and businessman. He has worked as a magazine reporter, tax preparer, screenwriter, copywriter, and loan officer. He graduated from Santa Clara University in 1999 with a B.A. in English. Andrew was born and raised in the City of Los Angeles.