When to refinance and finding the best rate 🏠💰📊
Deciding when to refinance is not just about a lower rate
TABLE OF CONTENTS
3-STEP GUIDE 📋
----------------
The attached breakeven table “estimates” how many years of new loan savings it will take to recover potential upfront costs.
Here are the 3-steps to know if you are in range to refinance using the breakeven table:
Find your current NOTE rate in either horizontal x-axis (there are two subsets)
Compare it with any of the refinance rates listed in the associated y-axis
Decide if the breakeven timeline (years) fits your objectives
WHEN TO REFI ✅
-----------------
Deciding if a refinance is worth it depends on two things:
The timeline you predict to be in the loan, before selling or refinancing again
The breakeven point for the rate you choose falls within that timeline
Selling or refinancing again before your breakeven point will result in a net loss on the loan, since there will be insufficient time to recover all upfront costs.
Higher rates sometimes offset ALL closing costs; this will result in a “0” timeline.
It is also best to stay under 3-years (zone of consideration) and no more than 5.
Current note rates lower than 6.250% are unlikely to breakeven within that timeframe.
Total loan costs, APR, and exact timelines will vary based on state, credit scores, and loan program chosen.
CUSTOM BREAKEVEN 🎯
-------------------------
Get an anonymous, customized breakeven analysis, instantly at LendZen.
Click the link below for an interactive rate quote and scroll down to the Benefit Summary section to see the breakeven analysis.
You can MODIFY any of the loan parameters from that screen or customize your own from the home page.
Use the “Save this Scenario” option to receive a private link and check rates for your exact criteria anytime with just one click.
LIVE RATE QUOTE WITH BREAKEVEN ANALYSIS
🧮👆
YOUR TIMELINE ⏳
------------------
The “timeline” is not about the loan term (15-Year, 30-Year, etc.) and in many cases isn’t necessarily about how long you plan to be in the home.
When choosing a timeline, you need to also consider how long before you think mortgage rates will become less expensive and choose the shorter of the two timelines.
Timeline is the only subjective part of deciding which rate to choose, the rest is derived mathematically.
Multiple rates will reach breakeven within your timeline but choose the rate that provides the most net savings at the end of your selected timeline.
This is not always the lowest rate, because lower rates have more upfront costs that need to be recovered.
To instantly and anonymously find the rate with the most benefit for your exact loan criteria visit LendZen.com
RATE PRICING EXPLAINED 📖
------------------------------
Most mortgages are sold into mortgage-backed securities (MBS) and the price of these bonds determines rates for all banks and lenders.
However, mortgage rates DO NOT rise or fall.
Instead, the price of each rate changes while the rates available to you remain the same.
The lower the rate, the more you pay upfront for it - this is often referred to as points but is known in the industry more as a “discount fee”.
When mortgage bond prices rise the additional liquidity (money) makes the price of mortgage rates lower.
This “feel like” lower mortgage rates are suddenly available even though they always existed – they merely dropped in price enough to make it marketable to offer them to borrowers.
This rate-price dynamic also means the higher you go in rate, the lower the fee.
Some rates even pay a rebate, which is paid as a “lender credit” and typically increases the higher you go in rate.
Rebates and discount fees (points) change daily, based on the fluctuation in mortgage bond prices.
ZERO COST REFI 💰
-------------------
When you are offered a “No Points” loan, the rate quoted has enough rebate to offset the fees normally charged by that lender in Section A of the Loan Estimate disclosure.
This is VERY different than a “No Cost” loan, which means the rate chosen has enough rebate to eliminate ALL new costs of doing the loan.
Although the “no cost” rate will be higher, the monthly savings from a refinance are experienced immediately because there are no upfront costs to recover.
This type of approach usually provides the most benefit (net savings) for borrowers considering shorter timelines.
Thanks for reading…
If you want to shop real-time mortgage rates and get instant qualification results without providing any contact information visit LendZen.com
The below snapshot is just a glimpse of today’s rates, but the pricing you see is exactly what you get - there are no additional lender fees or origination charges.
When you customize a rate quote on LendZen you get anonymous access to ALL AVAILABLE RATES that match your specific criteria.
Mortgage rates change daily, but on LendZen.com you can save a scenario and revisit your options anytime with one-click.
You can also request an official Loan Estimate for any loan you create.
Experience hassle-free mortgage shopping now at LendZen.com
LendZen Inc. is an equal opportunity mortgage lender, NMLS 375788
