Accountants and Advisers
Should You Re-Finance
One of the ways you can determine if mortgage refinancing is a sound idea for you is to use one of the many mortgage refinancing calculators available at finance sites on the Web. Mortgage refinancing advisability depends on several things. You have to look at your current rate of interest, the rate you might secure with refinancing, how long you plan to live in your current home, and the closing costs on the mortgage refinance. To fully understand the results of the mortgage refinancing calculators and the use they make of your information it is important to understand mortgage refinancing jargon. We've included some here. The first term is probably self explanatory.
You'll hear mortgage refinance professionals refer to your original mortgage amount. This simply means the amount of the loan that you originally signed for when you first took out your mortgage. Appraised value is a term you'll hear frequently as well. Lenders are referring here to the value the professional appraiser put on your home when it was first purchased. The phrase current term in years means the number of years you were given to pay off your original loan.
If you took out a 30 year mortgage your current term in years is thirty. Years remaining will come up in any mortgage refinancing discussion or calculation. It means the number of years you have left to pay on your mortgage. If someone asks for your income tax rate when they calculate your mortgage refinancing costs and options they want to know what rate of interest you paid to Uncle Sam last year when you did your taxes. The term calculate balance means to let the mortgage refinancing calculator determine what balance you have left based on the information you have given about the original loan and the years that remain on it. To let the calculator determine if mortgage refinancing is advisable for you you'll need to know what your home is currently appraised at or guesstimate this if you don't know and the balance of the mortgage. The calculator will assume you want to refinance the balance. If that is not the case – if you have funds from elsewhere that you are going to apply to the balance prior to refinancing then you'll want to subtract that total from the balance and indicate to the calculator that that new figure is your balance. You'll also have to have some idea of what new interest rate you are likely to get and then decide on the number of years you want to take to pay off the new loan. What is important to gather as well, is the loan origination rate.
This is the percentage of this mortgage refinance balance that you pay the lender as his or her loan origination fee. In most cases, this is going to be one percent of the loan balance. The term other closing refers to any closing costs for the new loan. This will include appraiser and filing fees. Points Paid is an important term to know for mortgage refinancing calculations. It means the number of points youll have to pay to your lending institution to reduce the mortgage interest rate. Each point represents one percent of the amount of the new loan. PMI is an important term as well. It means principle mortgage insurance.
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