How to Create Your Own Home Refinancing.
"5 simple techniques that can save you money"
Are you interested in saving money on your current mortgage?
Maybe you have just refinanced, or you just can't afford
the fees. Here are 5 simple techniques that anyone can use to
create their own refinancing package or add to their current
package.
1. Consider a shorter mortgage.
I saw a great article in the July 24, 2002 edition of the Wall
Street Journal (Section D1). The example was that if you had
a $200,000 mortgage for 30 years at 6.5% and you changed to
a 15-year mortgage and a rate of 5.9% your payments would
rise by about $400 to $1,677 a month. But, if you could handle
the extra monthly cost, you will save yourself $154,000 in
interest over the course of the loan.
2. Lose your PMI.
PMI is Private Mortgage Insurance. Generally if you have not
paid down 20% of the assessed value of your home, you may be
paying PMI. For example, on a $75,000 house loan, with a 10%
down payment, you would be making payments between $25
and $30 a month for this insurance.
To eliminate your PMI, we have a couple of suggestions.
1. Consider having your home re-accessed (only if you feel
your house has appreciated in value) and ask your lender to
remove the insurance.
2. Pay down your mortgage early to meet your lender's
criteria (generally 20%). Over the course of a few years, you
could save a $1,000 or more without a PMI payment.
Call your bank and ask questions before you spend any money.
3. Extra monthly payments
If you can afford to pay a little extra money each month on
your mortgage, you could save yourself literally thousands of
dollars while taking off years your loan. For example, I used the
payoff calculators at Green Point Financial
If you have a $100,000 mortgage at 7%, your monthly payments
without taxes and/or PMI would be $665. By paying an extra $25 a
month ($690), you would save $18,214 in interest and shave off
3 years and 3 months on the life of your loan.
4. One extra payment a year.
Using the same formula from #3. A $100,000 loan, for 30 years at 7%.
According to the financial calculator at
5. Direct Electronic Payments
Many banks will offer you a 1/4 to 1/2 point savings for paying
your loan electronically or by deducting it directly from your checking
account. By using this type of bill pay on a $100K, 30-year mortgage
at 7%, (and getting a 1/2 point reduction on your rate), you could
save approximately $12K. And, you never write a check again!
This is an excerpt from the "101 Financial Activities"
Newsletter.
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Questions, email Timothy Liptrap, editor at
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