Is a ‘quickie’ refinancing deal worth it
What the Occupy Wall Street crowd should be saying
(Reuters) I got a letter from my bank the other day offering a streamlined refinancing deal for my cheap moncler jackets mens current home mortgage. It was one of those offers tailor made for my loan moncler sale outlet situation and designed to net swift business moncler outlet online for the bank.
What was advertised in the letter seemed like a decent deal a 30 year, fixed rate loan at a 4.16 percent annual percentage rate so I called the bank for more details.
As it turns out, there was a lot of fine print that made it seem less decent, but I had to ask a lot of questions to find that out. While mortgage rates are still at generational lows, making it tempting to refinance, you have cheap moncler sale to scrutinize any deal that is offered. You may not even qualify moncler outlet woodbury for the appealing rates moncler sale that get dangled in front of you.
Banks like to send out these offers to preferred customers, appealing to whatever loyalty they may have toward moncler online store their institution. Mortgage offers are often hard to compare once you factor best moncler jackets in all the expenses, and banks tend to expect indolence and inertia on the part of their customers.
My current mortgage rate cheap moncler coats mens is 4.95 percent; so based on my loan cheap moncler jackets balance, I could save about $55 a month or moncler womens jackets $660 yearly over my present payment on a 30 year loan. Since I usually aim for savings uk moncler sale of at least $100 a month in a refinancing, the appeal of the offer was modest.
Loaded into this offer Moncler Outlet are closing costs and other fees: I pay $300 for an application fee, $24 for a credit check, plus additional expenses. All in, my total closing expenses would be around $2,200, the bank rep told me. I could either pay up front or roll most of it into the principal balance, neither of which was desirable for my moncler outlet store bottom line because it would reduce my monthly savings, and it would take me nearly four years to recoup the closing costs.
Although the bank willingly gave me the details of the hidden costs of the loan, the rep was soon pitching me on shorter term loans. Mortgages from this bank had lower rates 3.95 percent for a 20 year loan and 3.5 percent for a 15 year note but the payments would be higher. They would be up to $185 a month more.
The most salient benefit of shorter terms is that you pay the loans off quicker and pay less uk moncler outlet total interest. On my present 30 year note, I be paying $85,700 total interest, compared to $46,600 for a 20 year loan and $29,800 over 15 years.
Longer or shorter term? For the bank, moncler sale online any new loan is profitable because it receives closing fees no matter which term you choose. Shorter terms also net banks more in interest payments over a shorter period of time. If you sell within a couple of years, you may not recoup your closing costs.
The decision about the length of the term always depends upon: 1) whether you can afford to make the higher payment; and 2) whether the term coincides with your overall financial plan.
I have a neighbor, for example, who wants his mortgage paid off before his second child goes to college. Maybe you want your loan zeroed out before you retire? It makes sense to reduce your overall debt. discount moncler jackets And with interest rates near historic lows, you may instead choose to stretch out the loan as long as possible to keep cash free for more profitable investments.
NOW FOR THE FINE PRINT The best initial quoted rates were based on a credit score of at least 740 on moncler outlet the FICO scale and at least an 80 percent loan to value ratio. That means you should have at least a 20 percent stake in your property. I happen to own more equity than that. But you have to be careful with your home value as it has for many homeowners in the country, https://www.mymoncleroutlet.com my equity has eroded with falling home prices. Yours may have fallen as well. A required appraisal will tell you where you stand. I was moncler outlet sale okay on the credit score.
Credit score and equity are where the rubber meets the road. If somehow I didn have good credit or the equity had slipped below their threshold the rate they initially quoted would be raised, according to a tiered formula that penalizes those with lower credit scores or less home equity.
There one more thing that wasn even in the fine print: income verification. Post housing bubble, banks and mortgage insurers are extremely picky about this. In my case, the bank wanted two years of income tax returns. They even wanted my 2011 return, which I haven even finished yet.
Nevertheless, my chirpy phone banker assured me that in a good situation: you made all of your mortgage payments on time, your credit score is good and we assume your income is moncler usa okay. I glad I a model customer.
What if everything doesn line up for you to qualify for the best rate? You just pay a higher rate and mortgage insurance if your equity is below 20 percent, or be denied the loan altogether. There not much you can do about this unless you can clean up a damaged credit record or put more money down to avoid mortgage insurance. And rates vary day to day, so you roll the dice cheap moncler jackets womens by locking in a rate. That the least of your worries since rates have been ultra low since the 2008 crash and will probably remain so until 2014 at least that what the Federal Reserve is saying at the moment. One should never look at only one offer.
Ultimately, I decided to take a pass, even though the rates were tempting.
And, I have a better alternative to refinancing.
If I decide I want to pay down the mortgage sooner which I likely to do all I have to do is send in additional payments and tell the bank to apply them to principal. That avoids closing costs, credit checks and income verification. You can do this moncler uk outlet any time.
While it won reduce the annual percentage rate, prepayment will reduce my balance and total interest payments. It would also give me complete flexibility over when moncler outlet prices the loan is paid off. There are hundreds of free prepayment calculators on the internet, so you can do this yourself. Aside from the benefit of not having to deal with the hassles of the application process, you can beat the cost.