Vancouver Area Mortgage Refinance Cost-Benefit Planning

August 26, 2009 No comments »

As a brief introduction into blogging as an area expert, let me start with the basics everyone must consider to quickly know when to consider a mortgage refinance. Experts say homeowners should take a hard look at a refi if they can reduce their rate by even half a percentage point.

1) Compare potential savings to the cost of the refi.
Typical costs on a $125,000 loan include:

  • $450 - $725 in lender and broker administration costs
  • $200 -$410 in application fees
  • $50 - $350 in document preparation fees
  • $375 - $475 for an appraisal
  • $8.50 - $65 for a credit check
  • $50 - $850 for attorney fees

Plus, nearly all lenders require several months’ worth of property taxes at the time of closing. This could amount to thousands of dollars and will add to costs.

2) Look for “No-cost” refinancing with all the aforementioned in mind.
This process incorporates lender and broker fees into the mortgage itself, keeping your up front costs low.

For any refi, just remember:
The larger your loan, the more you’ll save with each rate reduction.

A 30-year, $300,000 loan at 7 percent interest, refinanced to a 6.5 percent loan will save you $100 a month and $35,000 in interest over the life of the loan.

A jumbo 30-year, $450,000 loan at 7 percent interest, refinanced to 6.5 percent, will save $150 a month, and about $54,000 over the life of the loan.

For specifics on the current climate, you really should contact me for a quick consultation.