Home Mortgage Refinancing Guidelines - Home Mortgage Refinance Calculator

By: Rick Contrata

Here's a quick checklist of home mortgage refinacing guidelines you can use to quickly estimate the possibilty of lowering your monthly mortgage payment, lowering the overall interest payments over the life of the mortgage or paying off your mortgage sooner. We've also included a handy home mortgage refinance calculator at the bottom of this page were you can

How long do you plan on staying at your current address? - If you don't plan on staying in your current residence for at least 5 years, then it will be pretty hard to recover your costs unless the mortgage refinance gives you a 2-3 percent drop from your current rate.

How long before the savings break even with the costs? - With home prices up Nationwide, it's not uncommon to carry a $250,000 30 year mortgage for middle income homeowners. A refinance for $250,000 with a 1 point drop in the interest rate will save about $2040 a year.

If your closing costs come in around 10K, you could recover your costs in about 5 years. Don't forget that although points paid are part of your closing costs, you'll get a tax benefit on a percentage of the points paid as an interest expense. Remember to figure in that savings when you calculate your recovery period.

Look into a 15 year mortgage for even more savings. - A 30 year mortgage is usually chosen because of the more affordable monthly costs, but you could save a bucket-load of money on interest expenses by opting for a 15 year mortgage.

With a 2-3 percent reduction in your refinance rate, even the higher monthly outlay for the 15 year mortgage might not be much more than you're paying now and you'll save thousands on interest payments because the loan would be paid in 15 years instead of 30.

What about an Adjustable Rate Mortgage *ARM*? - Adjustable Rate Mortgages in general have a lower interest rate than fixed rate loans. The lower rate means lower mortgage expense, but the lower rate does have its possible drawbacks.

The interest rate can change at the adjustment period. Subsequently, so will your monthly mortgage expense, but I wish I had a nickel for every fuzzy report that claimed there would be widespread loan defaults because of Adjustable Rate Mortgages. That obviously has not come to pass, but there is a comfort zone in fixing your monthly mortgage expenses with a fixed rate loan, even if those expenses are higher that they might be with an ARM mortgage.

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You can check the current best mortgage rates right now with this chart of the best mortgage rates located on the right side of this page. Courtesy of thefinancials.com

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First, grab a recent copy of your mortgage statement. You're going to need a few "real" numbers from it to get a good estimate of your mortgage refinance costs.

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Now that you've gotten the information, the options and the tools to decide if a mortgage refinance could be a good decision for your business, consult professionals like your accountant and your banker for the final details.

Related articles:
How to Calculate Mortgage Payment Affordability - Mortgage Payment Tutorial
Figuring Mortgage Refinance Costs and a mortgage Refinancing Calculator
Get a Free Federal Tax ID Number & Form, Federal Tax ID Tutorial

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Disclaimer: The information and the accuracy of the interactive calculator on this web page are provided as a self help guide only. This information and it's accuracy in no way replaces the expertise and guidance of industry professionals.

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Rick Contrata

Copyright-2004