How long should you wait before refinancing on your home?

Question

We have only been living in the house from a couple of months. I understand about waiting to see if the rates are lower than our original but do we need more equity in the home? Or do you just need the rates to be lower? And how much of a difference would it make if say there was a 1/2 of a point difference? Thanks for the help in advance

Answer 1

You do not give much detail so it is hard to answer your question with 100 accuracy. I will give you the numbers I am using so you will have a better understanding.

First... does 1/2 pt make a difference. Yes.
How much.... useing 100k as a number and 6.0 and 6.5 so you see the difference in .5 599.55 for 6.0 632.07 for 6.5 ... Now STOP I know what you are thinking.. oh thats only 32 dollars. But we are not done. Over the life of a 30 year note or 360 months that will save you......11700.20 .. Yes I said eleven thousand seven hundred dollars and twenty cents. But dont run our yet. There is still more. That 11k is nothing if you play your cards right. Are you ready for some real money???

Try it this way.... Add 100 extra to your monthly payment. By the way... your interest per day is about 17dollars at the begining of this loan so only 90dollars is going to the principal. Adding that extra 100 even to the first month will take you from month one to month three.

To put it simply.... after your first payment (using 100k @ 6.5 since you didnt give me the real numbers to use) you will have paid an extra months principal plus part of a day. Now instead of charging you interest on that 100 dollars you save that 63 cents. I know that doesnt seem like much.. BUT you have to remember this is over the life of the loan. So you save 63 cents the second month... thru the 360th. That would be 226.80 savings just for 100 dollars. Do it twice in a row ie first and second month and you will save 452.97 three times 678.51.. thats more than the monthly payment and it only cost you 300 dollars.

I wont go into ALL the math but you get the idea. If you do this right.. ie 100 a month extra. You will cut several... are you sitting down? YEARS off your loan.

So do not waste your time doing a refi. I mean if it drops a few points sure, but if it is less than 3 points Im not moving.

Answer 2

There is no specific time when you should refinance your property. You should only refinance when it benefits you, or you can lower your monthly payments.

You have to take in considerstion the fees and points you will be charged and when you can expect to get back your money for your refinance. I would say a 1-1.5 drop in the rate should be the standard. That way i will not take you long to get back your fees and points you paid for the refinance.

Your home is a great investment and just because the rates drop does not mean that you have to refinance. There are lots of things to consider. So be careful and look at all the aspects of a refinance.

Most people refinance to purchase big ticketed items, send children to school,pay off creidt card debt, and investments.

I hope this has been of some use to you, good luck.

"FIGHT ON"

Answer 3

It wouldn't hurt to check with a couple of lenders in your area, but listen carefully, don't let anyone push or prod you into taking out a loan unless you are really fully informed and understand everything! These loan officers are pretty hungry right now and may not make clear all the repercusions of your actions. 7.125% isn't bad, but if you can't save at least $150 a month on your mortgage payment, it may not be worth it. Remember you will have expenses associated with refinancing. You might consider getting a roommate instead for awhile.

Answer 4

1/2 a point lower is not enough for the cost you pay to close it. You have to consider the cost you paid in closing cost. If you paid $4000 for closing cost the first time, are you willing to pay it again to save yourself $50.00 a month? You probably wont even have THAT loan long enough for you to recoup the money that you paid upfront! It would take more than 5 years for you to recoup the difference. 90% of homeowners refinance within the first 5 years. What I see mostly of, however, is 2 to 3 years!

At least 1% lower would be good to refi to. But that's not happening soon...in terms of int. rates coming down.

Answer 5

listen to skip and alegna. the difference is not worth the cost of closing the deal. if you want a strait guideline to time frames, it depends on the pre payment penalty and if you have an arm and want to transfer to a fixed. waiting for rates to drop now is like waiting for water to run backwards. look at the terms of your loan if you have a pre pay penalty, and it is $2-3,000. that is added to the cost. how long will you keep the house? is it a starter home? if you have a piggy back mortgage and want to consolidate that may be prudent, or at least 12 months from closing. i will gladly listen if you give over the rest of the details, [e-mail]......the advice is right.