HSH.com releases first refinance calculator of its kind!by Tim Manni
Having already made the decision to refinance, your next step is to determine how to best manage the costs associated with the transaction. Mortgage borrowers have asked HSH.com a thousand times, “What’s the best strategy for handling my refinance closing costs?”
-Should I pay the refi costs upfront and out of pocket?
-Should I finance them into my loan amount?
-Should I just trade them for a higher interest rate?
The short answer is “it depends.” There’s no one simple answer, since each choice has its own benefits and total costs that are measured over time. One option may be more or less expensive depending upon how long you plan on holding onto your mortgage. If all avenues are open to you — you have some money saved and you have some equity in your home — then it’s important to determine which refinance strategy will save you the most money over time.
HSH.com’s new Tri-Refi Calculator is designed to do just that. The Tri-Refi Calculator allows you to compare the costs and savings associated with a traditional refinance, a low-cash-out refinance and a no-cost refinance.
A traditional refinance allows a borrow to obtain a current-market interest rate for a fee — typically two percent of the loan amount. Borrowers must first financially overcome the closing costs before they can recognize the savings of their lower interest rate. A proper refinance should allow a borrower to recoup their refi costs within two years or less. It’s important to remember that a “traditional” refinance will cost you upfront but will save you money on interest costs over the long term.
A low-cash-out refinance is structured so that the closing costs are added into the overall loan amount. You don’t pay the closing costs on your refinance upfront because your lender has added it into what you’ll be paying back in principal and interest over time. This strategy is popular among borrowers who have some equity, but maybe not enough available cash upfront to pay the closing costs. Remember, what it doesn’t cost you now will end up costing you later.
A refinance for free? Not exactly. While a no-cost refinance will cost you nothing upfront, the catch is that you trade those costs for a higher-than-market interest rate. Your trade-up rate will be approximately half a percentage point higher than if you went with a traditional refi. Is this your best option? Maybe, but it all depends on your situation. The Tri-Refi Calculator will help you answer that question.
Aside from comparing the strategies against one another, you can also quickly see how much you’ll save compared to your existing mortgage through multiple sets of charts and tables.
Make the right choice
Knowing which refinance choice saves you the most money is crucial to a successful transaction, and HSH.com’s Tri-Refi Calculator makes this decision quick, precise and easy.