Actually, the refinance boom is indeed over; however, there are a fair amount of people that still need to refinance. For example, I know of many people who have decided to move sooner than they imagined. I hear of consumers who thought that they would live in their homes for the long haul, but then due to circumstances that were a surprise to them, they have now decided to leave in the next few years.
Let me give you an example.
Let’s assume the following:
• A homeowner owns a home with a $300,000 loan that was financed in the last few months or years. He has a 4.25% 30-Year fixed rate.
• He currently owes $294,000.
• His principal and interest payment is $1,475 not including taxes and insurance.
The math
If this homeowner has realized he may move in 2, 3, or 4 years, he may want to refinance the current principal to a 3-Year ARM at 2.875%. The principal and interest payment would be $1,219. This would save him $256 a month!
Let’s estimate that the closing costs to the lender, title company, and state/county are around $3,000. That means the consumer would have an 11.7 month recapture period.
$3,000 costs / $256 savings = 11.7 months
So if you are planning on moving soon, do the math and figure out if it would be worthwhile to refinance.
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”.
