Re: when to refinance?

From: "J. Morgan" <jmorgan@ecentral.com>
Subject: Re: when to refinance?
Date: Mon, 21 Sep 1998 09:34:34 -0600

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>Date: Tue, 15 Sep 1998 14:49 -0500
>From: "Robert Loeser" <Robert.Loeser@medec.com>
>Subject: When to refinance a mortgage?
>
>     
>     I keep watching the mortgage rates drop.  How many points below my 
>     original rate should they fall before I consider refinancing?

There's no set answer to this question.  The old "rule of thumb"
used to be two points.

An alternate way to do it is to compare the costs to the savings.

Compare your present principal and interest payment to
what it would be if you refinanced.  Then look at how much
per month it will save.  Compare that to the cost per month
of closing on the new loan, then ask yourself how long you're
going to be in the home.

For instance, if it costs you $2400 to refinance, and your
payment drops by $100 a month, it would make sense to
do this if you plan on being in the house longer than 24 months,
the break even point.

Also consider whether you're paying PMI, and whether you will
have to pay PMI on the new loan, and adjust your calculations
accordingly.

Another thing to look at is how fast you want to build up
equity.  You might, depending on rates, be able to go from
a 30 year fixed loan to a 15 year fixed and keep the payments
roughly the same, and build equity a bit faster.

Hope this helps.

- --
J. Morgan



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