Many experts will tell you shouldn’t refinance unless you’re saving 1% lower in rate. With today’s interest rates being on average below 3% here’s how you should determine whether refinancing for you and your family makes sense or not…
Stop paying attention to all of the internet articles and all the so-called financial experts out there. It’s your mortgage, your house, your money, your bills, and ultimately your budget. Only you can decide. So please take what you hear on the internet with a grain of salt.
On average 30-year mortgage is right now with excellent credit conventional loans are under 3% for a single-family home. As an example, let’s say have a 3.75% 30 or fixed-rate mortgage and you can go to 2.75% on a new 30-year fixed-rate mortgage. You’re going down 1% in rate which translates to approximately $300 to $400 a month on most loan amounts. Taking the consideration closing costs of approximately $3k which is average closing costs on most loan sizes, and you have a speedy recapture. Generally, it doesn’t take much to realize such an opportunity would unequivocally make sense.
What about starting the clock over? Well, whenever you refinance your house and do a new 30-year mortgage you always start the clock over no matter what the experts tell you. There are two ways to offset this, the first way is to make the same payment on the new loan you were previously making on the loan you just paid off. Doing so would enable you to subsequently prevent starting the clock over while paying less and interest over the total term of the loan. The other is to have the lender you’re working with specifically amortize the loan based on the loan you’re refinancing.
et’s be clear getting a mortgage is really not the most fun thing in the world to do it is paperwork intensive, you have to be accountable to time frames. The savings ought to be in alignment with the paperwork. Simply put, it should be justified.
While there are some companies out there that have robust online lending platforms, at the end of the day don’t be fooled it’s still the same paperwork every mortgage company in America needs.
If you’re getting a refinance offer where you’re not paying any closing costs, make sure it is specifically no cost. Don’t let a lender doop you into a situation where you’re just rolling the closing costs into the loan, inflating the loan balance and, call that a no-cost loan. A good rule of thumb is you need to save at least $200 a month when refinancing, go into a shorter-term loan, or save at least 1% in interest if you’re going to paying fees. If you’re not paying fees those numbers can very easily go down and then it would be up to you to determine whether or not the opportunity makes sense.
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