Comments on: Home Equity Lines – They're Alive! http://www.amybergquist.com/blog/2009/03/10/home-equity-lines-theyre-alive/ News and views about real estate in Greater Hartford Thu, 09 Feb 2012 18:10:57 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Kyle http://www.amybergquist.com/blog/2009/03/10/home-equity-lines-theyre-alive/#comment-450 Kyle Fri, 20 Mar 2009 15:12:15 +0000 http://www.amybergquist.com/blog/?p=2129#comment-450 Hey Ben, thanks for the question. While I'm sure that there are some good websites out there, this is a decision that we can analyze ourselves. I put together a model when Amy and I refinanced that you may find useful. http://www.amybergquist.com/files/Refinance.xls I wanted to look at the difference in cash flows, so I lined up our current mortgage with a new mortgage at a lower rate to see what would happen. I then calculated the present value and IRR considering both the investment (refinance costs & hassle) and the monthly mortgage payment savings. The base case in the Excel sheet is a generic refinance from a 6.5% rate to a 5.0% rate for a $400,000 (initial value) mortgage. This scenario would be an obvious refinance since the homeowner would save over $400 per month on their payments. The only additional factor to consider is that you may need more cash than expected when closing the refi because you will have to fund new escrow accounts. Note that once the old mortgage is released you will also receive a check for the unused amount in the old escrow accounts. Good luck, and feel free to ask more questions! Hey Ben, thanks for the question.

While I’m sure that there are some good websites out there, this is a decision that we can analyze ourselves. I put together a model when Amy and I refinanced that you may find useful. http://www.amybergquist.com/files/Refinance.xls

I wanted to look at the difference in cash flows, so I lined up our current mortgage with a new mortgage at a lower rate to see what would happen. I then calculated the present value and IRR considering both the investment (refinance costs & hassle) and the monthly mortgage payment savings.

The base case in the Excel sheet is a generic refinance from a 6.5% rate to a 5.0% rate for a $400,000 (initial value) mortgage. This scenario would be an obvious refinance since the homeowner would save over $400 per month on their payments.

The only additional factor to consider is that you may need more cash than expected when closing the refi because you will have to fund new escrow accounts. Note that once the old mortgage is released you will also receive a check for the unused amount in the old escrow accounts.

Good luck, and feel free to ask more questions!

]]> By: Ben H. http://www.amybergquist.com/blog/2009/03/10/home-equity-lines-theyre-alive/#comment-449 Ben H. Fri, 20 Mar 2009 11:58:37 +0000 http://www.amybergquist.com/blog/?p=2129#comment-449 Do you know of any websites that assist in analyzing the costs and benefits of refinancing a mortgage? Some of the questions I would be looking to answer are: How long do I need to stay in the home to get full payback on the refinancing? The rule of thumb that I have heard is that it requires a least a 1% drop in you interest payment to make sense to pursue refinancing. How could I validate that? Other factors that I should consider? Do you know of any websites that assist in analyzing the costs and benefits of refinancing a mortgage?

Some of the questions I would be looking to answer are:

How long do I need to stay in the home to get full payback on the refinancing?

The rule of thumb that I have heard is that it requires a least a 1% drop in you interest payment to make sense to pursue refinancing. How could I validate that?

Other factors that I should consider?

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