If you don't refinance you may be missing out on a big savings! 37% of borrowers have fixed rates higher than six percent? This equates to $1.2 trillion of home loans!
In most cases a homeowner can recoup the cost of refinancing his home in 12 to 24 months if he saves half to one percent or more on his interest rate. This is all contingent on the amount of the loan and the closing costs of the refinance. The closing costs do vary considerably from one finance company to another.
The Home Affordable Refinance Program (HARP) has allowed many folks to take advantage of the lower rates. You can still take advantage of this program through June of 2010. It allows borrowers to refinance their homes with a loan to value of up to 125 percent. Many loans that qualify for refinance can take advantage of the low rates today. The basic requirements are as follows:
- Home must be owner occupied
- Property can be 1 to 4 units for a primary residence
- Current mortgage loan must be owned Fannie Mae or Freddie Mac
- Mortgage must be paid current and up-to-date
- Loan-to-value (LTV) can be no more than 125%
Even if you don't qualify for the HARP program you may want to check into refinancing. You could save big money! To figure it out all you have to do is take your current monthly payment minus your projected monthly payment and multiply that amount by 12. That equals your savings per year lets say $1200 Now take the the savings of $1200 and divide it into your projected closing costs, let's say $3600 and that gives you the number of years it will take you to break even on your refinance. After that you begin saving $$$. So if you stay in your house for 10 years after refinancing you have saved $8400 ($1200 X 7, the number of years after the break even point). Keep in mind that this is all contingent on the your new interest rate and the amount of your loan.
Happy Refinancing...now may be the prime time for you to add some disposable income to yourself!! Or you may want to consider a new home. It's a great time for that also.