Lots of reasons to refi. In thousands of talks I have had with borrowers over the decades, lowering their current rate and monthly mortgage payment is typically the #1 reason to refi, followed closely by getting some cash out from the refi to do lots of different things. Whatever the refi reason, all are looking for the best deal with the least amount of hassle. And that's my specialty--super low rates with a low hassle experience!
Below are some refi tips to help you decide what's best for you--and I'm always a text, call or email away to answer any questions you have.
Always focus on the monthly PI (principal and interest) portion of your payment.
A quick tip--for every one percent reduction from your current rate it's about a 10% reduction in monthly PI. A 2% drop is 20%, a 3% drop would drop your PI by about 30%.
If you're not sure of your current monthly PI payment--especially If you have impounds--taxes and home insurance included in your monthly payment-- take a look at your most recent monthly mortgage billing statement, find and add together the principal and interest portion of your payment --and voila! there's your monthly PI. Any confusion reach out to me and I'll assist with no sales pressure!
Let's say your monthly PI payment is $2000. If you can drop your rate by 2% you would reduce that monthly PI to about $1600. Now there are lots of other factors that might affect these numbers but for now we'll keep it simple.
The next factor to look at would be the total cost/fees associated with getting that lower rate. Even though in most cases these costs are added to the new loan amount, they are still a determining factor in knowing if your refi is worth it or not. Total lender fees would include all lender and title company fees charged on a refi. Recurring costs like property taxes, home insurance and daily interest aren't that big of a factor since you would be paying them with or without a refi in one fashion or another.
So if we use that $400 PI drop from the scenario above ($2000- $1600) you would want your refi costs/fees to be "recouped" with a lower payment in no more than 24-30 months, preferably in 18 months or less. A $400 monthly reduction times 30 months is $12,000 in target costs while 18 months would be $7200.
While getting the lowest rate is always the goal, sometimes a lower rate will carry a lot more fees resulting in the time to recoup those fees far exceeding the 30 month goal. In a few cases paying more in fees and taking longer to recoup via a lower monthly payment might make sense, but only if the refi rate is likely to be the lowest rates we will see for many years into the future.
Another benefit to a no cash out refi is the ability to skip one and sometimes 2 monthly mortgage payments and get as much as $2k or so cash back at closing. The loan program you are refinancing into would also determine if this feature would be available. In addition this could also reduce the monthly PI payment savings. Any questions on this please reach out.
Mortgage broker rates are almost always the lowest of all the lender types!
All mortgage money comes from the same secondary market --so mortgage brokers and big lenders get their funds at basically the same wholesale cost. What determines a lender's retail price (rate and fee combo) to you the consumer, is the coast of their overhead. Big banks and big nationwide lenders have huge marketing budgets as well as expensive offices and high priced management.
The only way for these banks and big lenders to make a profit with these expenses is to charge you more!