WHEN REFINANCING HURTS YOU

If you fall short of the break-even point, refinancing your mortgage costs you money. In that case, it may not be a good idea.

Let's say you bought your house five years ago, borrowing $125,000 at a 10% fixed rate for 30 years. Mortgage loan rates have since dropped and you're thinking of refinancing in order to cut your monthly P+I payments, which are currently $1,097. Your current loan balance is $120,718.

Your lender qualifies you for an 8% interest rate, which cuts your monthly payment to $932, from the table below:

Years Left	Loan Balance	9%	8%	7.0%
25	$120,718	$1,013	$932	$853
20	$113,673	$1,023	$951	$881
15	$102,083	$1,035	$976	$918
10	$83,012	$1,052	$1,007	$964

Not only do you save $165 ($1,097 - $932) in monthly payments, you also can invest those savings at some saving interest rate, which you estimate to be 6%. You estimate that your total closing costs will be $5,000.

There's an additional hitch -- you expect a job transfer to another city within a year, forcing you to sell your home. You will want to run the numbers to determine whether this scenario will get you to the break-even point. Depending on the probability of your relocation, you may wish to reconsider refinancing for now.

The above information is educational and should not be interpreted as financial advice. For advice that is specific to your circumstances, you should Contact us or Call us at (714) 657-7585 and our representative will help you fulfilling your real estate needs.