If you don’t know that interest rates are at historic lows, you’ve been living under a rock.
But just because interest rates are low, that doesn’t mean that refinancing will save YOU money.
Refinancing costs money. Included in the cost of refinancing is:
- appraisal fee
- title policy
- document preparation
- loan origination fee
- any points paid to lower the interest rate
- other miscellaneous fees
After factoring your monthly savings at the new interest rate, you need to look at the cost of refinancing and see how long it will take for you to break even.
For instance – refinancing costs you $10,000 in loan fees, title fees, points, etc. But, by refinancing, you’ll save about $425 a month on your mortgage payment. At that rate, it will take you 2 years to recoup your refinancing costs and really break even… and THEN the real savings will really begin.
So if you’re planning on selling your home in 1 year, you may as well not refinance, because even though your monthly payment will be lower, you will have lost $5,000 on the refinancing costs by selling after just 1 year.
So, is refinancing now right for you?
I can help you figure it out with a handy little spreadsheet. Contact me and I’ll help you crunch some numbers, or if you like – I can send you the spreadsheet and you can crunch them yourself. And depending on your goals, you’ll be able to figure out if now’s the right time for YOU to refinance.