You'd restart a loan that's mostly paid down
Say you're 15 years into a 30-year loan. A new 30-year loan can lower your payment, but it also spreads your balance over 30 more years. You could pay more interest in total, even at a lower rate.
If you want a lower rate without restarting the clock, ask about a shorter term, like 20 or 15 years. You can also keep the new 30-year loan and pay extra each month to stay on your old payoff date.
You'll move before you break even
Most refinances with closing costs take time to pay off. Your break-even point is your closing costs divided by your monthly savings. If you sell or refinance again before then, the fees cost more than you saved.
With CapCenter's ZERO Closing Costs, CapCenter pays for or waives the closing costs typically charged to process the loan (restrictions apply). That leaves little or nothing to earn back. You still pay prepaid interest and fund escrow, but those aren't fees. They're costs you'd have either way.
Your loan has a prepayment penalty
Some loans charge a fee if you pay them off early. Many common home loans don't, but it's worth checking. Look at your promissory note or ask your servicer. If there is a penalty, add it to your costs when you compare.
Your credit or income has changed
Your new rate depends on your credit, income, debts and home value today, not when you first bought. If your credit score has dropped, your debts have grown, or your income is harder to document, you may not qualify for a better rate than you have now. It may make sense to wait and improve those first.
Your rate is already close to today's rates
If today's rates are about the same as yours, a refinance may not lower your payment much. With typical fees, a small drop often isn't worth it. With ZERO Closing Costs, even a small drop can still save you money, as long as you're comfortable with the new term.
You'd use cash-out for everyday spending
A cash-out refinance turns home equity into cash and makes your mortgage bigger. That debt is secured by your home. Cash-out tends to work best for things with lasting value, like repairs or paying off high-rate debt with a plan to stay out of it. If you like your current rate, a home equity loan lets you borrow against your equity and keep your first mortgage.
A quick check before you refinance
Answer these with your loan consultant before you lock.
- How long do you expect to keep the home and the loan?
- What are the total closing costs, if any, and your monthly savings?
- How many years are left on your current loan, and what term are you choosing?
- Will you pay more or less total interest over the time you'll keep the loan?
- Does your current loan have a prepayment penalty?
