| Question #1: Before you actually start seeking quotes | | | | If you don't know, off hand, you can pull a copy of last |
| on your Refinancing Home Mortgage loan, you need to | | | | year's tax return and calculate the percentage of your |
| estimate the number of years or months you expect | | | | gross income that was paid to IRS. Then multiply your |
| to pay on your new Mortgage Loan before you | | | | pretax savings on your monthly loan payment by your |
| refinance again or sell your home? | | | | tax rate and you will have your after tax savings per |
| The answer to this question will provide the first part | | | | month. |
| of the equation to determine what type of loan might | | | | Question #4: What will your actual "out of pocket" |
| be best for you. The 3 basic types of financing I'm | | | | costs be at closing? Hud estimates an average of 3% |
| referring to are A: No Cost Closing ( lender pays your | | | | to 6% of the refinanced total. But there is such a |
| 3rd party costs) B: No Cost Closing (lender adds your | | | | variance of fees charged by each lender that you |
| closing costs into the loan amount and amortizes them) | | | | probably will have to compare the estimate from each |
| and C: You pay your costs at closing. | | | | one. |
| Be aware that your interest rate will be higher on loan | | | | If, for example, your total closing costs will be $3000, |
| A, where the lender actually absorbs your closing | | | | you can simply divide $3000 by the after tax monthly |
| costs. | | | | savings amount and you will know how many months |
| Remember, no matter what type of refinancing you | | | | it will take you to break even on your new loan. If you |
| decide on, you will normally have some costs at | | | | expect to be paying on your new mortgage after that |
| closing. Specifically you may have "prepaids" which | | | | time then a Refinancing Home Mortgage Loan is |
| include accrued daily interest from the first day of the | | | | indeed a cost saving solution for you. |
| month and escrow for real estate taxes and home | | | | The key here, as always, is for you to do your |
| owners insurance. | | | | homework first and to get quotes from a number of |
| Question #2: How much lower will your new loan | | | | lenders before you actually accept any offer. |
| payment be than the current mortgage payment? | | | | P.S. Since some fees are called by different names by |
| This answer will show you how much you will save | | | | each lender it might be simpler for you to total up the |
| each month in pre tax dollars. We will refine this | | | | list of figures from each lender, excluding the prepaid |
| amount by answering the following question. | | | | interest and escrow amounts, and compare the totals. |
| Question #3: What is your current income tax rate? | | | | |