Refinance Tips to Save You Cash
I began studying the art of negotiating a mortgage refinance deal many years ago, but the game has remained exactly the same. The surface may have changed, but the core structure is still there. What are the most important things you can do to set yourself up for a hot new rate? How do you know when to go after a new rate? What is a refi?
First things first. The nickname “refi” is short for refinance. This is the word for locking in a new mortgage rate for your home loan. Often times, this involves switching banks, but it is possible to refinance with your original lender. Most people don’t know this and only sort for different lenders. This is unnecessary.
What happens is, market rates change. So the going rate at this moment, is very likely to be different from what you secured when you signed your contract with the dealer. This is called a rate reset, or a rate adjustment. And in this change lies your opportunity.
Why keep a high rate when you could switch to a lower one? This means less billing on a monthly basis. You can take that money and use it to do other things, or just save it for safe keeping. Unfortunately, too many people don’t understand this concept, and stick to an unnecessarily high rate for the entire length of their loan.
So when do you make the switch? Well, here is my rule of thumb: whenever the current market rate is 2% lower than what you got, it’s a good bet now is the time to make the crossover. Now this isn’t set in stone, but it’s a good benchmark. Lots of people go by this, and it seems to work out for them.
How much of an impact would a decrease of two percentage points make on your monthly payouts — a big one I suspect. Remember, 2% of 1 million dollars is $20,000. That’s not bad at all.
Continued on the next page
Follow Technorati