REFINANCE YOUR HOME
MORTGAGE '
Interest rates are low again.
This may not be good for your
savings account, but is good for
your mortgage. This could be a
good time to consider refinanc
ing your home mortgage.
Before doing so, look at the
numbers.
When you refinance your
home mortgage, you may be
required to pay points. Points
are pre-paid interest. Each point
represents one percent of the
amount you are borrowing that
is paid up front. Three points on
a $lOO,OOO mortgage, for exam
ple, would be $3,000. The more
points you are willing to pay at
closing time, the lower your
interest rate will be. Points on
refinancing are not deductible in
the year you pay them, but must
be spread equally over the num
ber of the years of the mortgage.
There will be other costs
associated with refinancing such
as an application fee, title
search, recording fee, and
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appraisal fee. Tb make a com
parison of whether you are bet
ter off refinancing, you need to
determine what all these costs
will be. Lenders are required by
law to give you an estimate of
closing costs when you apply for
a loan.
The next question is how
much longer do you plan to live
in the house? If you anticipate
moving within the next three
years, it is doubtful you will
recover the costs of refinancing.
To save interest costs, consider
putting the amount you would
have paid for refinancing toward
pre-paying the principal.
For refinancing to make
sense, you need to have a lower
interest rate. How much lower
does it need to be? The old rule
of thumb is two percentage
points. Rules of thumb being
what they are, it is still a good
starting point, but most comput
er analyses indicate that a
smaller margin will usually be
advantageous.
Other reasons to refinance
are to change from a longer term
mortgage to a shorter one. The
lower interest rate may enable
you to convert the remaining
term of your 30-year mortgage
to a 15-year-mortgage while
keeping your monthly payment
the same. This will enable you to
pay off the mortgage much earli
er saving you thousands of dol
lars in interest costs.
Conversely, you could refi
nance to a new 30-year mort
gage. By extending the term,
you will have lowered your
monthly payment. You will pay
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ANSWER L.A. Martin, Canandaigua, N.Y., wanted a
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Imitation Crab Meat Salad
IV4 to 2 cups cooked or canned imitation crab meat
Vi teaspoon salt
1 stalk celery, finely chopped
V 4 cup mayonnaise or salad dressing
1 tablespoon lemon juice
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1 pound ground beef
'A cup chopped onions
8-ounce can tomato sauce
6-ounce can tomato paste
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V* cup hot water
1 teaspoon salt
1 teaspoon cumin
1 tablespoon vinegar
Vi teaspoon dry mustard
Brown beef and add onion. Cook about 5 minutes. Add
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powder if desired.
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more in total interest costs over
the life of your mortgage, but
this will be offset in part by the
new lower interest rate.
You can refinance to change
from an adjustable rate to a
fixed rate mortgage to gain the
certainty of a level payment.
This will probably result in a
higher interest rate, however.
There are alternative to refi
nancing.
If your goal is to save on
interest costs, consider pre-pay
ing your mortgage. You can do so
(Continued from Page B 8)
UncMter Fanning, Saturday, October 17, 199849
at no additional cost and save
thousands in reduced interest
costs. An extra $5O a month will
reduce your principal by $6OO
each year. If you are still in the
early years of your mortgage,
this may knock off several years
of payments at the other end.
A home equity loan or line of
credit allows you to borrow up to
80 percent of the value of the
equity in your home. The inter
est rate for these will be higher
than for refinancing. As with
refinancing, there are costs
involved in obtaining either of
these. You can use the money for
home improvements, financing
your children’s education, or for
other purposes. Using it for a
vacation, current spending, or
other “non-investment” items,
however, is not a good idea
because you are putting your
home at risk. The interest on the
home equity loan or line of cred
it is tax deductible.
A second mortgage is another
alternative. Interest rates are
comparable to installment
loans, but the interest you pay
on the second mortgage is tax
deductible. As with the home
equity loan or a line of credit,
the money is best used for
investment purposes such as
home improvements, education,
or medical bills rather than cur
rent consumption.
Looking to refinancing as a
way to solve a debt problem is
not likely to work, but it will
reduce the cost of the debt. After
all, you cannot borrow your way
out of debt.
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