|
10/8/2008 1:16:40 PM
|
ahodges
Posts 1
|
We are currently carrying a home mortgage of approx 200,000. We were thinking of refinancing $125,000, while simultaneously paying off 75,000 on the old mortgage. However, were were told that it would be best to first pay down our existing 200K loan, then seek a refinance, since otherwise the refinance closing costs would be based on the old, 200k mortgage. Is that right?
|
|
10/8/2008 2:57:00 PM
|
MortgageMarvel
Posts 38
|
You are correct that you will pay lower closing costs on a $125,000 loan as opposed to a $200,000 loan. However, you don't have to make that payment before seeking the refinance.
Let's just focus on the principal balance to keep things easy. There are 3 possible options…
1. If you pay down your current loan by $75,000, the amount of principal that needs to be paid on the current loan will be reduced to $125,000 and that amount will need to be paid off when you close your new loan. Your closing costs would be based on a $125,000 loan amount.
2. If you apply for a new loan amount of $125,000 without having paid down your current loan in advance, you would have to pay the $75,000 at closing to make up for the shortfall between your new and current loans. Your closing costs would be based on a $125,000 loan amount.
3. If you apply for a new loan amount of $200,000 and paid the $75,000 after your new loan closes, your closing costs would be based on $200,000.
You should only take out a $200,000 loan (option #3 above) if you will not have the $75,000 available until after you close the refinance.
|
|
pages:
1 |
|---|
|