Mortgage Master Service Corporation
January 2002
1. Are you currently paying private mortgage insurance? Chances are if you put less than 20% down on your property when you bought it, you are paying for private mortgage insurance. PMI is of no benefit to you. It only provides the investor with coverage in the event you default on the loan.
2. Do you have a adjustable rate mortgage? With the current fixed rate programs at record lows, now could be an excellent time to convert your ARM to a fixed product.
3. How long do you plan to keep your current property? If you plan on selling in 1-2 years, it may not be cost effective to refinance your property. Your current interest rate would have to be significantly higher than the current market in order for a refi to make financial sense.
5. Is your existing mortgage FHA? Should you refinance, you may receive a refund of the balance of the upfront mortgage insurance you have financed into your loan. (Unless your property is a condo, then FHA does not charge upfront mortgage insurance).
6. When will you break even on the closing cost? In my opinion, you should "break even" within 24 months (which means you should be planning on living in the property for 2 years or more). If you take your total closing cost (do not add in the prepaids, taxes, and insurance), and divide it by the difference between your existing principle & interest payment and the proposed principle & interest payment, you will be able to see how many months it will take for you to recapture the cost of refinancing.
In addition, if you currently have an escrow reserve account, after closing, your will receive the balance of this account from that investor. Typically, you will also skip one mortgage payment when you refinance.
Mortgage Master Service Corporation
(206) 718-WITT(9488)