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November 26th, 2010 (Modified on December 1st, 2010)

Refinancing: It’s all gravy once you break even

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Gravy Mortgage rates have come down so precipitously that even homeowners who purchased or refinanced their properties fairly recently may be able to save even more by refinancing again.

These days, you’re probably thinking about pumpkin pie, not points, and cranberry sauce, not credit. But one thing you should be thinking about — a lot — is gravy. No, not the sauce, but the money you might free up by refinancing your mortgage. Here’s how you can calculate your potential savings.

Mortgage refinancing: making tradeoffs

Refinancing isn’t free; you have to pay for it somehow. The financing costs associated with your refinance do offset some of the money you can save on your new home loan. The primary goal when running the numbers on a mortgage refinance is determining what financing strategy saves you the most money over the long term (or, at least, over the period that you plan to hold your property).

If you’ve already refinanced your mortgage to take advantage of today’s mortgage rates, then you’ve realized some of the potential savings. If that’s the case, it’s all the more critical that you understand when another refinance will or won’t save you even more.

Whether it’s your first refinance or not, once the decision is made, your next step is determining how you’re going to pay for it. Here are your three options:

  1. Traditional Refinance: In this option, you pay the closing costs out of pocket at the closing table. While you get the benefit of the lower interest rate, you have to overcome your closing costs today before you realize any financial benefit.
  2. Low-Cash-Out Refinance: Instead of paying closing costs out of pocket, this option wraps the costs into the new loan amount. Since you are financing the costs, you’ll not only pay the principal on them but the interest as well.

Continue reading Gina Pogol’s article Refinancing: It’s all gravy once you break even.”

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2 Responses to “Refinancing: It’s all gravy once you break even”

  1. joel lobb Says: November 26th, 2010 at 1:32 pm

    Good article about refinancing. I am sure this will get some people off the fence. Rates are headed-up

  2. Tim Manni Says: November 29th, 2010 at 10:44 am

    Thanks Joel!

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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