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When is it financially responsible to refinance?
Category - Mortgage Questions - Mortgage Loans FAQ's

When is it financially responsible to refinance?

Ever heard the old rule of thumb, you should only refinance if your new interest rate is at least two points lower?
That was true when I started in the business in 1983, but with refinancing dropping in cost over the last few years, it's never the wrong time to think about a new loan!

The short answer to the question is: "It's all in the numbers."

How do you get the numbers?
First, you need to obtain an ACCURATE Good Faith Estimate of Settlement Costs from your Mortgage Broker (a Mortgage Broker will have access to more programs and options than your "Bank" or "National Lender" will).

Then you calculate your monthly savings based on your Current Mortgage Payment minus your New Mortgage Payment. Your Mortgage Broker can help you with the calculations. If you can recapture the cost of refinancing (through the lower payments) in 24 to 36 months then I would consider it worthwhile. (This assumes that you will be keeping the loan on this property long enough to recapture the cost of refinancing.)

When you refinance your mortgage the loan amount will be based, in part, on the current appraised value of your home. If the value is high enough you may be able to eliminate the PMI that you may be currently paying, or pay off that "piggyback" loan that you took out when you originally purchased your home. The potential savings from either of these items may be more valuable to you than the benefit received from a lower interest rate. Again, your Mortgage Broker can help you figure it out.

If you are "shopping rates" always ask for a Good Faith Estimate from the Loan Officer you are talking to - if they can't or will not provide you with one, hang up - they are probably one of the "Bait and Switch" outfits that unfortunately still exist in out industry.

If you are looking for a mortgage in California, I can help you and you can contact me at
If you need Mortgage services, in another state, from a provider you can trust - I can help you find an Upfront Mortgage Broker® in your area that can help you.

Please visit our web site at and find out why an Upfront Mortgage Broker® is your best choice when looking for a Mortgage. Buying or Refinancing we guarantee what we do!

Additional Benefits of Refinancing:

You might also be able to "cash out" some of the built-up equity in your home, which you can use to consolidate debt, improve your home, take a vacation -- whatever! With lower rates and balances, you might also be able to build up home equity faster with a shorter-term new mortgage.

CAUTION! You might have to pay a penalty if you refinance your previous mortgage too quickly. That depends on the terms of your existing mortgage. These penalties are illegal in some places, and more often than not when they're there apply only for the first year or two. I can help you figure it out.

You might pay points to get a more favorable interest rate. If you pay (on average) two percent of the loan amount up front, your savings for the life of the new mortgage can be significant. You should be aware that the IRS has recently said that points paid for the purpose of refinancing your mortgage cannot be deducted in their entirety in the year you pay them, unless the refinanced loan is primarily for home improvements. Consult your tax professional before deducting points you pay on your new mortgage from your federal income taxes.

You can send an email to me at if you have an interest in refinancing. We can discuss your specific situation and together determine if it makes sense to refinance at this time.

Jack McKenzie,
"The Mortgage Guy"


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Mortgage Questions - Refinancing FAQ's
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Mortgage Questions - Mortgage Loans FAQ's
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