How can I decide if refinance is right for me?

Your home may be the largest asset you have. Before deciding to refinance, be sure to consider the following so you can make an informed decision.

Determine your estimated costs

When you refinance, you may pay:

• An origination charge, which may include fees such as application or processing.
• Discount points to lower your interest rate further. (May be tax deductible. Consult your tax advisor regarding deductibility).
• A prepayment penalty if your current loan has a penalty for early payoff.
• Other settlement charges such as appraisal, credit report, title search, and title insurance fees.

If you’re an existing Wells Fargo Home Mortgage customer, you may be eligible for a streamlined refinance with no closing costs, application, or appraisal fees.1

Tip 

You may be eligible for a reduced reissue or refinance rate on your title insurance if the property’s current policy was issued recently. Ask your title or closing agent if you qualify.

Assess how much longer you’ll stay in the home
If you plan on owning the home for an extended period of time, and the interest rates are 1/2% to 5/8% lower than your current rate, refinancing may be the right choice for you.

Your break-even point occurs when your savings from your new loan equals the cost of getting the new loan. 

Determine your breake point

Your break-even point occurs when your 
savings from your new loan equals the 
cost of getting the new loan 

WHat are the benefits of refinance ?

When interest rates are low, you might consider refinancing your mortgage. Refinancing may allow you to replace your current loan with a new mortgage that has better terms. Here are some of the potential benefits of a refinance.

Increased cash flow

• Your loan’s monthly payment typically decreases with a lower interest rate.
• With a lower payment, you can use the extra funds for retirement savings, paying other debts, saving money for college, or other purposes.

Potential to switch to a different loan type

• If you have an adjustable-rate (ARM) or a balloon mortgage, reduced interest rates may make a fixed-rate mortgage more desirable, especially if you want the stability of an interest rate that does not change over time.
• If you have a long time left on your mortgage, lower interest rates may make it possible to switch to a shorter-term mortgage.
  • You can pay the principal balance down and build equity faster.
  • You may pay less interest over the life of the loan with a shorter term loan.
• If you have a jumbo loan you may be able to refinance to a "blended jumbo" (Mortgage + Home Equity Financing). 

Opportunity to access the equity in your home

• While you’re lowering your interest rate, you may want to consider using the equity in your home to pay for major purchases or to make home improvements. This type of loan is known as a cash-out refinance.
• See how much available equity you have for a cash-out refinance with a free refinance analysis.

Refinancing can be effective if you consider your refinancing goals and select the option that may be right for you. Consider the following.
If your goal is to:

Reduce monthly payments

• You can reduce your payment by refinancing when interest rates drop sufficiently below your existing rate.
• As another option, you can refinance to a longer term mortgage to lower your monthly payment, though you will raise your overall interest costs.
• With either option, you can pay discount points to further reduce your interest rate.

Repay your mortgage faster

• Refinance to a shorter term to raise monthly payments for faster repayment and reduce your overall interest payments.
• If interest rates are low enough, you may be able to get a shorter-term loan for faster repayment without a significant increase in your monthly payment.

Access home equity while lowering payments or repaying faster

• A cash-out mortgage refinance can affect your mortgage interest rate and provide funds for home improvement, debt consolidation, and other major expenses.

Plan for an adjustable-rate mortgage (ARM) interest rate change

• You can explore your options before your payment adjusts to see if refinancing may be right for you.

Access the available equity in your home without reapplying (if you qualify)

• You complete only one application, work with a single contact, and attend one simultaneous closing transaction for both products.
• You can choose from a variety of financing options.

Source: www.Wellsfargo.com