I currently have a FHA home loan. 6.25 % back in 2006. I keep getting these things in the mail to refinance. Is it a good idea? The loan was for 123,888. My current house payment is about 850 a month. If I refinanced would it really bring it down that much? Thanks for the help.
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you don’t want to refinance just to bring your payment down. when you refinance have a purpose for doing so. are there bills or debts that you want to pay off, are you wanting to make repairs to the home, etc. every time you refinance you will increase your loan amount with closing cost, and more interest. the payment of the mortgage will depend on your interest rate. also keep in mind that in order to get a better interest rate your credit, assests, and property value must be in order.
If you bought an FHA home back in 2006 (with the standard 3.5% or so down), you probably don’t have enough equity in the property to refinance it. In fact, the value of the property has probably gone down to the point where you owe a lot more on it than it would currently appraise for.
If for some reason the property value has not gone down and you can refinance, consider that they may be charging you points (loan origination and discount fees) to have the loan go through. In this case, it may take several years of the new lower payments to make up the amount of the loan fees. And, it would not make sense to refinance.
Another consideration is that it’s generally not worth refinancing if you’re only lowering your interest rate by a half point or less. Especially with such a small amount financed. For example, if you went from a 6.75% mortgage on $123,000 to 6.25%, that would only save you $40 a month.