If I refinance the loan for my house at a lower interest rate, what changes?

Question

Assume all other things remain the same. Does the amount of principal change? Does the value of the home change to the current value (lower or higher than the previous price for the house)?

Answer 1

Two things will definitely change, and a third item may change.

The value, either the market value or the taxable value will not change.

Along with a few other items, your monthly payment is directly related to your interest rate. Since this is a move to a lower rate, you can expect a decrease in your monthly payment.

"Yippee!!!!!!!!!!!"

However, I tend to look at mortgage bankers as lawyers without college degrees (and used car salesmen as lawyers with a GED and so on..). If you have good credit, be wary of how much the mortgage costs.

You are paying for this mortgage, but paying it indirectly. This money comes out of the equity of your home. So in effect your payment goes down, but so does your equity. I have seen some mortgages with a cost as high as $7,000, and this is obscene!

As I said, if you have good credit, processing your mortgage is not a difficult thing to do, and you should be able to get the same deal from many mortgage brokers.

If this mortgage costs you more than $1500 - $2000, go somewhere else. As I said, this is coming out of your equity, and there is a back loaded cost to this mortgage of having to pay for the lost equity.

Also, I have heard rumblings about the mortgage lender's appraisal being used by a municipality for reassessment purposes. There are a couple of websites touting this as fact, but I have not encountered it, nor have I heard of it happening yet.

Frankly, I'm still confused as to how the municipality even finds out that you have refinanced. You aren't selling the home, and nothing's filed with the city, so how do they even know?

This is not something I would worry about, but since the information is out there, I figured I should make you aware of it.

If it is a concern, you can very easily check with your local municipality's offices and do a little investigating.

But the only "real" affectation of refinancing will be the lower payment and the loss of equity.

Answer 2

Everything changes to the new terms of the new lender. The value of the home is what it is currently not what it was when you got your first mortgage unless it was less than a year since you purchased the home. The lender would use the purchase price less than a year. The principal is how much you borrow in the refinance. If you put money down it lowers, if you finance closing cost it increases. The real question would be why do you want to refinance? If you have an adjustable rate, by all means refinance to a 15 or 30 year fixed. If you can get a 2% lower interest rate than go for it. If you are refinancing it usually takes up to 8 years to recover your closing cost. If the average person refinances or sells every 5 to 8 years it is not wise to refinance. Feel free to email me if you would like more detailed advice on refinancing.

Good luck,

Michael

Answer 3

The principal will increase with the refinance fees. Your home's value is always changing. Your monthly payment will decrease. And the cost of your loan over the life (that scary page that shows the true cost of the mortgage) will decrease significantly.

Answer 4

The balance will change, the payment will change.
It depends pretty much in what you want when you refinance.
you want cash??? your payment to the principal and interest is higher.
Shot me an e-mail if you want to know more benefits of refinancing
[e-mail]

Answer 5

value is what value is. Nothing affects that.
principal can change if you roll in any costs.