Tips for Refinancing a Loan with a Low Balance

Shane in Edgewater has been researching ways to refinance a house. Sheâ??s been in her loan for 10 years, has $30,000 or $40,000 in equity and only owes $51,000. She asks Robert Palmer why she isnâ??t getting anywhere because of her low balance.

It might not be worth it to refinance if there isnâ??t a large amount owed. When a balance is lower, there needs to be a greater amount of savings to make it worthwhile. For instance, 1% savings on a loan of $250,000 is vastly greater than 1% on a $50,000 balance. Itâ??s harder to find the savings on loans with lower balances.

Often, things like an appraisal and closing fees to the title companies are fixed. A $500 appraisal on a $300,000 loan is substantially less of an impact than $500 on a $50,000 loan. Those fixed fees could eat the entire first year of savings, in which case it might be more beneficial to just stick it out.

Make sure you compare the rate AND the fees, donâ??t get caught up on one or the other. A little bit lower of an interest rate with a lot of exorbitant fees isnâ??t going to be worth it.