Posted on: 10th Dec, 2005 03:38pm
Refinancing offers you the chance to lower down the rate of interest. Low rate of interest means that your monthly mortgage payment amount will be lower and you will be able to pay the loan with more ease. When you are seeking to get a low rate of interest, you need to follow the 2% thumb rule of refinancing.
The 2% refinance rule of thumb says that it pays to refinance if the rate of interest on refinancing loan is 2% lower than the rate of interest on your existing mortgage loan. Low rate on the new loan implies than you will be able to recover the costs of the new loan. In other words, you will be able to break even the costs of the new loan.
However, this 2% thumb rule of refinancing can’t be used universally. This rule may not be applicable in case of low-cost or no-cost mortgage refinancing loan. In case of a no cost mortgage refinancing loan though there are no upfront fees but all the costs are included in the mortgage rate of interest. So, obviously the rate of interest of a no cost mortgage refinancing loan is higher than the rate of a common mortgage refinancing loan. In other words, the rate of interest of a no cost mortgage refinancing loan is already high and so the 2% refinance rule of thumb may not be applicable here.
The 2% refinance rule of thumb says that it pays to refinance if the rate of interest on refinancing loan is 2% lower than the rate of interest on your existing mortgage loan. Low rate on the new loan implies than you will be able to recover the costs of the new loan. In other words, you will be able to break even the costs of the new loan.
However, this 2% thumb rule of refinancing can’t be used universally. This rule may not be applicable in case of low-cost or no-cost mortgage refinancing loan. In case of a no cost mortgage refinancing loan though there are no upfront fees but all the costs are included in the mortgage rate of interest. So, obviously the rate of interest of a no cost mortgage refinancing loan is higher than the rate of a common mortgage refinancing loan. In other words, the rate of interest of a no cost mortgage refinancing loan is already high and so the 2% refinance rule of thumb may not be applicable here.
Hi,
We currently have a 6% FRM on $88,000 home. We've lived here for over 6 years. We do not have a penny and are not planning to move anytime soon. We would like to refinance to help us with our debts. Our credits are average. I would like to know if we qualify for refinancing. Thanks!!
We currently have a 6% FRM on $88,000 home. We've lived here for over 6 years. We do not have a penny and are not planning to move anytime soon. We would like to refinance to help us with our debts. Our credits are average. I would like to know if we qualify for refinancing. Thanks!!
hi guest,
if you want to qualify for a refinance you should have a stable income and a good credit score. apart from this you should also have equity in the property. if you want to take a conventional mortgage, then you should have a credit score of at least 720-740. if you satisfy the required criteria by the lender, then you would be able to get a refinance.
thanks
if you want to qualify for a refinance you should have a stable income and a good credit score. apart from this you should also have equity in the property. if you want to take a conventional mortgage, then you should have a credit score of at least 720-740. if you satisfy the required criteria by the lender, then you would be able to get a refinance.
thanks
Hi,
Refinance option according to me is no doubt very good as, this will definitely work out a great help for you. as, for this you need to require good credit score and stable income which will help you to achieve good.
Thanks!
Refinance option according to me is no doubt very good as, this will definitely work out a great help for you. as, for this you need to require good credit score and stable income which will help you to achieve good.
Thanks!
Thanks for your inputs. I found out that my credit is not the perfect average score I had thought. My credit scores are in the high 600s. I know this is not good enough. I am not sure what to do now...
Hi Guest,
You can apply for a loan modification with your lender. The lender will agree to your request depending upon your financial situation. In this process, the lender may reduce your interest rate in order to make the loan more affordable for you to pay it off. However, the term of the loan may get increased in this process.
You can apply for a loan modification with your lender. The lender will agree to your request depending upon your financial situation. In this process, the lender may reduce your interest rate in order to make the loan more affordable for you to pay it off. However, the term of the loan may get increased in this process.
Don,t forget to add the cost of the extra years you will have to pay on the loan. You could have paid 8 years of payment now you will have to go back to 30 years. That is an additional 8 yrs times 12 months equals 96 months at full payments. Refinance doesn' sound to good to me.
I am considering refinancing to lower payments. I am 57 yrs old, plan to live in this house forever, owe 149,000, 24 years at 1080.00 a month. The current rate offered is 4.6 and my payment would be 930.00 for 30 years. Please advise.
Hi Marilyn,
As you're planning to stay in the property forever, it will be a good idea to refinance the loan in order to take advantage of the lower rates. If you have the financial situation to afford the payments, then you can refinance the loan.
Thanks,
Jerry
As you're planning to stay in the property forever, it will be a good idea to refinance the loan in order to take advantage of the lower rates. If you have the financial situation to afford the payments, then you can refinance the loan.
Thanks,
Jerry
I understand the 2% rule but my question is this point thing? what does that mean. I am trying to refinance my house 120,000 we got our home in 2008 @ interest rate of 6.75% and right now I have heard its running around 4.75% which would be very beneficial but I don't understand the points that if stay in your home after you have refinance for two years more you get your points back...I hope someone can help!
Thanks!
Rose
Thanks!
Rose
Are you speaking about the break even period? It is the minimum length of time that you must hold the new mortgage to make the refinancing pay.
Do you have to have excellent credit to refinance?
What if your credit is above your means
What if your credit is above your means
Welcome Tina,
You should have excellent credit scores in order to get a mortgage refinance. If you want to qualify for a conventional loan, you should have a score of 700-720 whereas for FHA loan, you should have a score not below than 580.
You should have excellent credit scores in order to get a mortgage refinance. If you want to qualify for a conventional loan, you should have a score of 700-720 whereas for FHA loan, you should have a score not below than 580.
I need to refinance $203,000 at a rate of 4.875% with no closing fees. Currently my rate is 5.5%> I am planning to stay for a long time in my house. Please advise
Welcome Huda,
I feel it would be a good option to refinance the loan with type of rates and terms you are getting. Moreover, you won't have to pay any closing costs even. Thus, it would be a good option to refinance. However, you can speak to the other lenders of your area in order to find out if someone can offer you a further low interest rate. If you receive a further low rate, then you can go for it.
I feel it would be a good option to refinance the loan with type of rates and terms you are getting. Moreover, you won't have to pay any closing costs even. Thus, it would be a good option to refinance. However, you can speak to the other lenders of your area in order to find out if someone can offer you a further low interest rate. If you receive a further low rate, then you can go for it.
I have same questions as friendship,
"Don,t forget to add the cost of the extra years you will have to pay on the loan. You could have paid 8 years of payment now you will have to go back to 30 years. That is an additional 8 yrs times 12 months equals 96 months at full payments. Refinance doesn' sound to good to me."
Do we have to account for the "years" when comparing monthly payment? As friendship stated, you new payment may be is $200 less and you can break even with the fee in 2 years but you have 30 years of payment instead of your existing 22 years remaining. How you compare?
"Don,t forget to add the cost of the extra years you will have to pay on the loan. You could have paid 8 years of payment now you will have to go back to 30 years. That is an additional 8 yrs times 12 months equals 96 months at full payments. Refinance doesn' sound to good to me."
Do we have to account for the "years" when comparing monthly payment? As friendship stated, you new payment may be is $200 less and you can break even with the fee in 2 years but you have 30 years of payment instead of your existing 22 years remaining. How you compare?