Question 21: “Should I refinance my mortgage?”
“Should I refinance my mortgage?” This is the question I’ll address today, Day 21 of a 30-day series looking at the top questions in real estate.
I think we all agree that the mortgage rates have been low for some time. What that translates to is greater buying power – or leverage – for buyers. Buyers are able to get more house for less money.
But you may not be looking to buy now – maybe you’ve been in a home for a couple years and bought in a 4 or 5% interest rate environment.
If that’s the case, then you should definitely consider refinancing. On a $400k loan at 4.5% interest rate, the principle and interest payment is $2,027. Refinance to 3.5% (obviously we’re not factoring any mortgage paydown for this scenario) and that same payment is cut by $231 or nearly $2,800 per year. Calculate that over 30 years at the higher interest rate and you’ll have saved maybe a couple years of college for your kid.
Obvously there’s no way for me to hit every scenario and confirm whether you should refinance, but if you’re looking to stick with a 30-year loan, current rates are sitting around 3.445%. Talk with a professional to determine how much money you could save. If you’re looking to shorten the life of your mortgage to a 15 year term, rates are around 2.549%.
Essentially, you need to look at how much it will cost to refinance compared to your savings and how long it will take to recoup those expenses. If you plan to stay in the home longer than the time it will take to make back the original cost to refinance, then it’s probably worth it.
If you’re on the fence about whether it makes sense to refinance, have the conversation with a lender immediately. Rates have been at historic lows and are ticking upwards. By delaying locking in at a lower rate, you’re throwing away money. If you don’t have a reputable lender to speak with, call me and I’ll put you in contact with one in your area.
One more little tidbit that will take 7-10 years off the life of your mortgage: make one extra payment a year. You’re welcome.
Tomorrow I’ll answer the question, “When is it going to be a buyer’s market again?”
When it comes to real estate, it matters who you work with. If I can answer any questions you have or assist you with buying or selling a home or investment property, reach out to me directly at 703-552-5259.
If this information is helpful, give me a thumbs up and share with a friend. To get my updates, take a moment to follow me on all the social channels @thedomusgroup. My name is Jon Tripp and I’m a Realtor in Northern Virginia. As always, thanks for joining me.