There’s been lots of talk in the press about refinancing lately. Here’s a small sampling of it…
Should you refinance a fixed rate over 5%? “It all depends on how far you are into the mortgage,” says CAAMP’s Jim Murphy. “If it is only a year or so, the penalties you would have to pay to refinance may not make the process worth it. If there is just a year to run, however, chances are you can save money even after paying penalties.” (Globe)
“To me, [refinancing] is pure mathematics. There is nothing speculative or probabilistic about the decision to break a mortgage…If the homeowner can refinance into a mortgage with an identical term that reduces monthly payments above and beyond any penalty costs, then go for it. Plain and simple.” — York University professor, Moshe Milevsky (FP)
If you want to break your mortgage early, Rob Carrick says the first step is to “Ask your lender what your penalty would be. There’s no standardized calculation of penalties.” If refinancing makes sense, but you don’t have cash for the penalty, Carrick suggests you take “the cost and add it to your mortgage balance.” (This is known as capitalizing the penalty.)
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