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Should You Refinance Your Home Mortgage?

Should you refinance your home mortgage?

Housing costs are one of the largest components of most household budgets. With interest rates changing so frequently, you should periodically determine whether refinancing at current interest rates would save you money.

To determine whether you should consider refinancing you need to compare the costs of obtaining a new mortgage with the savings you will enjoy with a reduced interest rate. You my also want to consider refinancing to a different type of mortgage, such as switching from a 5 year balloon to a 15 year fixed rate mortgage.

Here is an example and a worksheet that will help you determine if refinancing makes sense for you. You may want to print this article and use the worksheets. Rick and Carol have a home they bought 3 years ago for $300,000 and they have 5 years remaining on balloon mortgage of $200,000 with an interest rate of 6.25%. Their monthly payments are $1231.43. They intend to live in their home for several years and would like to lock in a 30-year mortgage with a 4.375% fixed rate.

 

Rick and Carol's Example

New Mortgage Costs

Discount points (in $)

$ -

Origination points (if any)

$ 1500

Application fee

$ 475

Credit check fee

$ -

Attorney fees (yours)

$ -

Attorney fees (lender's)

$ -

Title search fee

$ -

Title insurance fee

$ -

Appraisal fee

$ -

Inspections

$ -

Local fees (taxes, transfers)

$ -

Other fees

$ 360

Total cost of new mortgage

$ 2335

 

Calculating the Savings

Monthly payment on current mortgage

$1231.43

Monthly payment on new mortgage

$998.57

Difference between two mortgage payments

$232.86

Divide total fees on new mortgage by monthly savings - This is the number of months to recover your costs.

10 months

 

In this example, Rick and Carol would save almost $2800 annually in mortgage payments and lock in a 30 year fixed rate mortgage. Over the course of the mortgage they would pay about $83,000 less in total interest.

Worksheets for you to use

New Mortgage Costs

Discount points (in $)

$

Origination points (if any)

$

Application fee

$

Credit check fee

$

Attorney fees (yours)

$

Attorney fees (lender's)

$

Title search fee

$

Title insurance fee

$

Appraisal fee

$

Inspections

$

Local fees (taxes, transfers)

$

Other fees

$

Total cost of new mortgage

$

 

Calculating Your Savings

Monthly payment on current mortgage

$

Monthly payment on new mortgage

$

Difference between two mortgage payments

$

Divide total fees on new mortgage by monthly savings - This is the number of months to recover your costs.

 

 

Check out our mortgage refinancing calculators found in the Education Center that can make the calculation easier. 

Other considerations
When reviewing the feasibility of refinancing, you may also wish to consider refinancing a larger or smaller amount than the current balance of your mortgage. If you have excess funds available and believe you will have a hard time earning a return greater than the mortgage rate, you may want to pay down your mortgage and get a new mortgage that is smaller. If you have other liquidity needs, you may want to refinance a larger amount to free up some of the equity in your home.

Remember that mortgage interest is tax deductible if you itemize your deductions on your tax return. Consult your tax advisor to see how this may apply to your situation.

Final thoughts
No interest rate environment lasts forever. Unfortunately there is no crystal ball that will tell you when rates have reached their lowest level. Taking action now to evaluate whether refinancing now makes economic sense, and evaluating the type of mortgage you want can help you be in control of one of your largest household expenses. 

We at MutualBank are here to help you each step of the way. Call your MutualBanker at 800-382-8031 to start finding the right solution for you. Go ahead...live a better life!

Apply Online 

Check Rates

Contact a Representative Today

Back to Education Resources

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Personal Banking Security Measures for the 21st Century

clientuploads/21st-Century-Securitysquare180.pngMany of us are constantly connected to the online world these days. This means that the potential is there for our computers and personal information to be compromised which greatly increases the risk of ID theft and financial fraud to occur. However, by taking some basic precautions you can significantly reduce the risk of your computing environment being compromised. Following these simple guidelines should help your computing environment become more secure:

Keep your computer and software up-to-date

Keep your computers and network equipment secured with the latest software updates and enable automatic updates whenever possible.  This includes updates to third party applications such as Java and Adobe Products.  

Use hard drive encryption

In the event your machine is lost or stolen, drive encryption can prevent others from accessing the data on your hard drive.  The purpose is to encrypt or scramble your data on your machine so that it can only be read with your encryption key.Many operating systems offer drive encryption.  Microsoft offers Bitlocker and Apple has FileVault. There are also other third party encryption offerings.   

Enable your firewall

Think of the firewall to your computer as the fence around your property.  If there were multiple holes cut in the fence, it wouldn’t be very useful at keeping people out.  Firewalls are typically enabled by default on Windows machines, but double check to make sure it’s on.  Here are instructions to do so if you are using Windows 7. Only allow necessary applications inbound access through your firewall. The same principles apply to your network firewall. 

Configure your screensaver

Set an auto-locking screensaver so your account gets locked out after a few minutes.  This is useful if you forget to lock your machine when are away from it. On Windows machines this can usually be done by pressing the “Windows Key” and the “L” button simultaneously.

Make your passwords stronger

The longer and more complex the password, the better.  At least 16 characters with a combination of upper and lowecase letters, numbers, and special characters is a best practice.

Configure your router

Use the strongest wireless security available (currently WPA2-CCMP) with a long and complex password for your wireless network. Disable WPS on your wireless router for greater security.   

 


Think that some secure banking information
of yours has been compromised?

If you suspect that your personal financial information has been compromised, call MutualBank Customer Support at 800-382-8031.


 

Monday, April 7, 2014

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Should You Refinance Your Home Mortgage?

Should you refinance your home mortgage?

Housing costs are one of the largest components of most household budgets. With interest rates changing so frequently, you should periodically determine whether refinancing at current interest rates would save you money.

To determine whether you should consider refinancing you need to compare the costs of obtaining a new mortgage with the savings you will enjoy with a reduced interest rate. You my also want to consider refinancing to a different type of mortgage, such as switching from a 5 year balloon to a 15 year fixed rate mortgage.

Here is an example and a worksheet that will help you determine if refinancing makes sense for you. You may want to print this article and use the worksheets. Rick and Carol have a home they bought 3 years ago for $300,000 and they have 5 years remaining on balloon mortgage of $200,000 with an interest rate of 6.25%. Their monthly payments are $1231.43. They intend to live in their home for several years and would like to lock in a 30-year mortgage with a 4.375% fixed rate.

 

Rick and Carol's Example

New Mortgage Costs

Discount points (in $)

$ -

Origination points (if any)

$ 1500

Application fee

$ 475

Credit check fee

$ -

Attorney fees (yours)

$ -

Attorney fees (lender's)

$ -

Title search fee

$ -

Title insurance fee

$ -

Appraisal fee

$ -

Inspections

$ -

Local fees (taxes, transfers)

$ -

Other fees

$ 360

Total cost of new mortgage

$ 2335

 

Calculating the Savings

Monthly payment on current mortgage

$1231.43

Monthly payment on new mortgage

$998.57

Difference between two mortgage payments

$232.86

Divide total fees on new mortgage by monthly savings - This is the number of months to recover your costs.

10 months

 

In this example, Rick and Carol would save almost $2800 annually in mortgage payments and lock in a 30 year fixed rate mortgage. Over the course of the mortgage they would pay about $83,000 less in total interest.

Worksheets for you to use

New Mortgage Costs

Discount points (in $)

$

Origination points (if any)

$

Application fee

$

Credit check fee

$

Attorney fees (yours)

$

Attorney fees (lender's)

$

Title search fee

$

Title insurance fee

$

Appraisal fee

$

Inspections

$

Local fees (taxes, transfers)

$

Other fees

$

Total cost of new mortgage

$

 

Calculating Your Savings

Monthly payment on current mortgage

$

Monthly payment on new mortgage

$

Difference between two mortgage payments

$

Divide total fees on new mortgage by monthly savings - This is the number of months to recover your costs.

 

 

Check out our mortgage refinancing calculators found in the Education Center that can make the calculation easier. 

Other considerations
When reviewing the feasibility of refinancing, you may also wish to consider refinancing a larger or smaller amount than the current balance of your mortgage. If you have excess funds available and believe you will have a hard time earning a return greater than the mortgage rate, you may want to pay down your mortgage and get a new mortgage that is smaller. If you have other liquidity needs, you may want to refinance a larger amount to free up some of the equity in your home.

Remember that mortgage interest is tax deductible if you itemize your deductions on your tax return. Consult your tax advisor to see how this may apply to your situation.

Final thoughts
No interest rate environment lasts forever. Unfortunately there is no crystal ball that will tell you when rates have reached their lowest level. Taking action now to evaluate whether refinancing now makes economic sense, and evaluating the type of mortgage you want can help you be in control of one of your largest household expenses. 

We at MutualBank are here to help you each step of the way. Call your MutualBanker at 800-382-8031 to start finding the right solution for you. Go ahead...live a better life!

Apply Online 

Check Rates

Contact a Representative Today

Back to Education Resources

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