Important Things To Remember When Refinancing

February 23rd, 2012

What do you do in order to remind yourself of things? Tie a string around your finger? Use a paper day planner? Do you use a software or online calendar? How about just using my blog instead!? I hear of many people getting sold a refinance, instead of making sure they are doing it for the right reasons. Below are some good notes to remember when thinking of refinancing.

Important Things To Remember When Refinancing

• Don’t pay points on a refinance, keep costs low.
• You still have to qualify with the proper debt ratios, income and credit.
• If you have the assets consider paying your loan down if your appraisal comes in lower than needed.
• When you hear “no cost” refi’s being advertised, they are simply building the costs into a higher rate.
• Don’t refinance from a Conventional to an FHA, the mortgage insurance cost on an FHA loan is enormous.
• The HAMP and HARP loans are very hard to get, typically have to be processed at your current lender, and are priced somewhat higher than the current interest rates.
• Don’t solely shop price, also shop experience and execution, it is a very difficult time in the mortgage industry, shopping price will get you in trouble. There is no free lunch.
• All the rules of thumb about when to refi are wrong, simply calculate the recapture period, what are you spending in costs and what are your savings per month, and then see if are you happy with the recapture period.

Don’t refinance if the costs are $4,000 and the savings are $100 a month, which is a 40 month recapture period, and you know you plan to move in 2 years! And even without a planned move, a 40 month recapture period is horrible. I find most people I refinance achieve 10-18 month recapture periods, and save anywhere from $200 a month to $500 a month, or more.

Brian Martucci is a loan officer for Capital Bank Home Loans, a division of Capital Bank, N.A. He has been in the mortgage industry since 1986 and has served in a number of roles, including loan processor, loan officer, mortgage broker, branch manager, and vice president. Brian Martucci – NMLS# 185421. His opinions do not necessarily reflect the opinions and beliefs of Capital Bank Home Loans or Capital Bank. Capital Bank, N.A.- NMLS# 401599. Click here for the Capital Bank, N.A. “Privacy Policy”.

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