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The Facts About Variable Annuities and Refinancing
Dear Jeff:
I'm thinking of refinancing my home right now. There are a lot of ads for "no cost" refinancing. Since there's always a catch, what's the catch with these loans? Is it a good idea to use one to lower my monthly payments? I've been paying on my home for 10 years now.
Jeff Says:
Refinancing is a very hot topic due to the lowest interest rates in years. Lenders are competing for your business and they have to make their mortgage programs attractive or lose your business; but you still have to be careful about "no cost" financing.
Perhaps the financial institution will waive application fees or points, but what about the appraisal cost, title search, title insurance and attorney fees? The good news is that the lender in most states is required to provide the applicant with a written estimate of expected closing costs so you will know in advance.
Preliminarily, there are a few steps that you should take to determine whether or not to refinance. First, run an amortization schedule of your existing loan and the proposed new mortgage, including any closing costs that you want to finance. Assuming the monthly payment is less, compare the total amount of interest that you will pay with both scenarios.
The amount of time remaining on your original mortgage is also a critical factor because it is already 10 years old. You should also consider the length of time that you will remain in your home. It is really not complicated once you have a handle on these facts. In any event, do your homework before you proceed to avoid unfavorable surprises.
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