Here’s the readers question…

“We have Wachovia as our lender.

We have to stay in our loan until another 10 months or we get hit with a $5,000 fee.

I was wanting to refinance b/c we have 2 loans, one for $19,??? and the other for $78,???.

Our payment is $916 a month and only $69 actually goes towards the loan.

Would it be best to refinance now or wait until next year so that we do not have to pay the $5,000?”

My answer:

The question is easy to calculate.

Take the refinance rate you can get today, calculate the monthly savings, and divide the savings into $5000..the prepayment penalty.

If your savings is equal to or greater than the prepayment penalty…do it now.

Under normal circumstances, this is all you’d need to make your decision.

However, now that we have a declining real estate market, you have another factor to consider.

If you can refinance today…but a year from now..you can’t due to dropping home values…well that’s a problem.

Given this, you should probably refinance as soon as possible to avoid the possibility of getting trapped by dropping values.

Great question!

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