Tag Archive | “save by refinancing”

Refinancing Your Mortgage: ARM to Fixed

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To take the decision to refinance a mortgage is just a simple comparison of costs versus savings, but that is only if you’ll replace an old fixed-rate loan with a new one.But a big “if” comes here.

A huge number of homeowners want to get out of adjustable-rate loans, and for them to tally the savings is trickier.

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If in a month you save $200 from a new fixed-rate mortgage and closing costs were $4,000, then the savings would take 20 months to offset the costs. You would really save $200 in a month by refinancing, after that breakeven point.

Those homeowners who have adjustable-rate mortgages can’t pinpoint the monthly savings over the long term because they don’t know what their payments will be years down the road.

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Save More With a Refinancing/Prepay Combination

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Using today’s low rates a huge number of homeowners are applying to refinance their mortgages, so that they can reduce the monthly payments, often by hundreds of dollars.

But one can save more by availing the opportunity of using spare cash to reduce the size of the new loan. Rather than to refinance all $200,000 still owed on old mortgage, for instance, using cash you are able to take out a new loan for $150,000, to make up the difference.

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The same strategy is used by many borrowers when they make mortgage prepayments. But when coupled with a refinancing, you can have immediate benefits of paying down the debt instead of getting a benefit after a delay. It is due to the fact that the monthly payment is smaller.

Extra Principal Payments

Extra principal payments are made by many homeowners; either they make these payments regularly or in occasional lump sums. Interest charges are reduced by paying down principal, or outstanding debt, they make us able to save often tens of thousands of dollars over time. Moreover they also allow the homeowner to pay the debt off years ahead of schedule.

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