Monday, August 19, 2013

Is Home Mortgage Refinancing Worth It?

Is Home Mortgage Refinancing Worth It?



To figure this out you need to know your current rate and the rate at which you would refinance. There is a “two point” guideline that has been the main school of thought for a long time. It assumes that mortgage refinancing becomes worthwhile if your mortgage refinance rate is at least 2 percentage points below your current rate. However, today HUD/FHA sees a net tangible benefit if your PITI (principal, interest, taxes, and insurance) declines by at least 5 percent or if you go from an adjustable mortgage to a fixed rate mortgage.


• How long to do you want to realize the savings?
• Will you realize the savings before you purchase another home?
If you expect to live in your home for another 3 \ to 5 years, the two point rule generally works in your favor, your monthly savings will generally offset the costs of your home mortgage refinance within 3 to 5 years. Depending upon your situation, you may be able to refinance with less than 2 percentage points and realize your savings in an acceptable time frame.
If you plan to remain in your property for a shorter stay or it will take significantly longer to recognize your monthly savings, you may want to seek other options.
You may also want to evaluate how many years will be added to your mortgage payments. You may not want to add another 10 or 15 years to your mortgage payments if you only have 10 years left.