If you refinanced your mortgages a year or so ago, when interest rates averaged just below 5 percent for a 30-year fixed-rate loan, you may be wondering whether it’s time to refinance yet again now that rates are at least a full percentage point lower.
With the average rate on a 30-year loan at or below 3.83 percent, down from 4.63 percent a year ago, refinancing may be worth considering.
If you are considering refinancing, you should first delve into your financial goals, specifically the length of time you plan to live in the home. You may end up deciding that it makes more sense to stay with your current mortgage, especially if the savings are small or you plan to move within a year or two.
In fact, when you refinance you are no longer building equity at the same rate as you are starting at the beginning of the amortization tables. With the amortization of a loan, in the first few years almost all of the payment goes toward interest, so the longer you have the the loan, the more each payment is put toward the principal.
If you refinanced in the last year or two, then you don’t have to consider amortization tables. However, you do need to know when refinancing would begin to pay off. In order to calculate this, start with a rundown of all the closing costs, then divide the closing costs by the amount expected to be saved on each monthly payment. This will give you a clearer picture if refinancing makes sense.
If you need the recommendation of a trusted lender for your refinance, give us a call.