Comments on: Money Myth - Refinancing A Mortgage

By: steveb

steveb — Sat, 13 Sep 2008 16:17:26 +0000

Borrowers who live in their property and have loans that were issued between January 2005 and June 2007, also, they must spend at least 40% of their gross monthly income on all household debt.

Whether they are up-to-date in their mortgage or if they are in default, they must prove that they will not be able to keep up with their existing mortgage payments, and attest that they are not deliberately trying to default just to obtain the benefits of lower payments that this program offers.

By: BoilierHorn

BoilierHorn — Tue, 27 Mar 2007 03:55:53 +0000

[quote]When I have considered refinancing, I have always looked for a no closing cost refinance and set the term to be the same remaining on my current mortgage.[/quote]

In almost every refi closing statement I have seen, you ’skip a month’ of payment in exchange for the arrears interest (due to payoff amount) to be applied to the new balance. I guess you could pay that interest in order to avoid the arrears interest, but i think you have to pay it at payoff/refi time…

How am I wrong or am I getting ’screwed’?

By: makingourway

makingourway — Sat, 25 Mar 2006 08:17:30 +0000

Jeffrey, $2m, Caitlin, et. al.,

I think there’s also another dimension to refinancing - what you’re going to do with the house.

It certainly makes sense to incorporate closing costs, interest rate savings, extended mortgage period (and therefore increased interest payments).

However, if you are not intending to stay in the property for long - example 20 somethings planning on moving from the city to the suburbs to raise children, a lower monthly cash out amount might be helpful - especially if they need to increase available cash for either their move or downpayment. Then again, you might need to weigh the issue of equity in the house vs. accumulated cash.

Have a wonderful weekend,
Making Our Way
http://makingourway.blogspot.com

By: Journey To Financial Freedom » What I learned from others - Money Myth : Refinancing A mortgage

Fri, 17 Mar 2006 23:43:07 +0000

[...] 136 - What I learned from others - Money Myth : Refinancing A mortgage March 18, 2006 | What I Learn from Others | Mortgage, Real Estate, Refinancing, What I Learn from OthersJeffrey Strain, one of the personal finance who wrie a lot of articles for Saving Advice Website. Today I found his blog called Personal Fiannce Advice because of his post about the money myth. In his post, he shared with us the money myth of refinancing a mortgage. Below is part of his post that I want to share it here: [...]

By: John OMM

John OMM — Thu, 09 Mar 2006 15:39:45 +0000

I think you’ve made some good points. Consumers should take into account more than just the monthly payments when they purchase anything with an installment agreement whether it be a house, car, television or toupee.

By: Caitlin

Caitlin — Sat, 04 Mar 2006 21:24:57 +0000

I think the my of “lower monthly payment = saving money” is even broader than mortgages (like someone assuming thata 5 yr auto loan with a lower monthly payment is a better deal than a 3 or 4 year loan, simply due to the lower payments) and that the most important point is that folks need to run the numbers.

Yes, there are situations where refinancing will save you money…but the point that’s being made here (I think) is to not just assume a lower payment has saved you money.

I’ve refinanced twice within a three year period, but i felt I had good reason for doing so each time. Of course now I want to go do some math…LOL

By: RS

RS — Thu, 02 Mar 2006 21:12:00 +0000

The closing costs are another thing to consider when refinancing. They can sometimes be quite large…I think mine were almost $5000 when I did it 5 years ago or so. Just something else to consider.

By: 2million

2million — Thu, 02 Mar 2006 18:59:19 +0000

I agree its a good point to consider - many people boost that they save money when they refinance but they don’t know what they are talking about. When I have considered refinancing, I have always looked for a no closing cost refinance and set the term to be the same remaining on my current mortgage. Therefore I have no out of pocket costs and the term hasn’t changed - therefore if I have a lower monthly payment I know I have come out ahead.

By: thc

thc — Thu, 02 Mar 2006 18:51:58 +0000

You make an excellent point that many folks don’t consider. And these days most lenders will write a mortgage for almost any length you desire.

By: pfadvice

pfadvice — Thu, 02 Mar 2006 17:18:19 +0000

Your blanket statement is mathematically incorrect. If the interest rate is low enough, it certainly does make sense to refinance. Look at it this way: each time you make a payment you are refinancing your mortgage at your current interest rate and your new principal balance. You need to compare the sum of your remaining interest payments and the sum of your new theoretical mortgage.

Of course there are always exceptions and you always should always run the numbers and why I said “likely pay much more money over the long term for the loan.” — and you are correct, I should have pointed that out more clearly as I made an assumption (which was probably bad on my part) that those who read me would already know that.