Phoenix Mortgage Rates – How To Use The Two Percent Refinancing Rule
December 30th, 2008
If you are considering refinancing your phoenix mortgage, it is important to consider all the additional costs that you will accrue from refinancing charges. When a loan broker offers to refinance, it will take a considerable amount of paperwork and time, for which you will be paying.
Put simply, the two percent role simply states that if there is a 2% difference between your current phoenix mortgage interest rate and the new rate, refinancing will make sense. Of course, you could use a 1% difference in points, however, it would take you much longer to recoup the difference in the price of your loan.
With lower rates, it certainly makes sense to decide to refinance your phoenix home, so how should you go about doing this? The first step is to call a lender, and have them quote what the monthly payment would be, if you refinance your existing loan and replaced it with a new one. Most lenders will be happy to estimate this cost for you, and then you can figure how long it will take in order to repay the refinance charges.
The biggest charge that you will face in refinancing your phoenix house is title insurance, in order to protect a mortgage lender in the event that you do not pay your property taxes. So let’s do some numbers and see how much money you can save with the steps.
Let’s assume that your mortgage is currently $1000 a month, and a lender offers you a lower interest phoenix mortgage rate, with your new mortgage payment being $800 a month. The difference in these amounts would be $200 a month, however, it will cost you $3000 to refinance your phoenix home loan.
Keep in mind that you will have to pay taxes on those $200 and then you will be able to pocket the difference. For example, if you pay 25% tax on the $200 that is saved per month, you’ll have 150 extra dollars a month. $3000 divided by $150 means that it would take 20 months for you to recoup your initial investment in phoenix refinancing fees. After a year and three quarters, you would then be able to pocket all this money in savings.