This past week, my husband and closed on a refinance of our home. When we crunched the numbers, we realized the savings was just far too great NOT to proceed. We actually knocked 8 years off of our repayment period by dropping to 15 years. We reduced our interest rate from over 5% to 3.85%. We will end up saving nearly $60,000 over the life of our loan -- which is bascially money in our pockets.
I will admit that it was the last savings that REALLY caught my eye. $60,000?! That just made it a no-brainer for us to proceed. While I'm certainly not an expert in mortgages (by any stretch), I do know about saving money. Sure, it is so simple to remember to clip the coupon or find the good deal on line, but so often we forget about what we might be able to do save elsewhere - including the mortgage.
Interest rates are very low right now. As mentioned above, we locked in at 3.85% for 15 years. You might find the a rate close to that - or perhaps even better! When it comes to select your repayment terms, you can always choose 15, 20 or 30 years. Of course, the lower the term, the lower your rate - but higher the monthly payment. Before you refinance, you will want to ask yourself a few questions:
How long until you will hit your "break even" point? Meaning, when will you start to save more than what you paid for closing costs?
How much interest can you save over the life of your loan?
Can you afford a slightly higher payment now to pay off your loan sooner (and get that better rate)?
Will your house appraise for enough to allow for the refinance?
Will you need cash to put to cover closing costs?
There can be other factors that you may want to check into as well (based upon your own personal situation). So make sure that you speak to qualified professionals and enlist their help before you make any decisions. You just may be surprised at the additional money you could have in your own pocket after you sign on the dotted line.
Tracie Fobes is not a mortgage or loan expert and does she claim to be. The statements above are her own and are not to be construed as advice nor recommendations. Consult an expert before making any financial decisions.