October 23, 2018
Greetings Thrifty Friends,
Refinancing, or paying off your existing mortgage with a new one, could be worth it when it saves you money. And while interest rates are up in many markets right now, it very well could help you save.
However, just because you might get a better rate doesn't mean that refinancing is the right option for everyone.
Keep pinchin' those pennies,
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TODAY'S THRIFTY TIP:
* It only makes sense to refinance if the new mortgage is going to be better for you financially. The first place to look is the interest rate, which is a good indicator of how much you could be saving.
If you have a $100,000, 30-year fixed-rate mortgage with a 6 percent interest rate, your monthly payment will be $600. Refinancing your mortgage and dropping your interest rate to 3.5 percent could lower your monthly payment to $450 - saving you $150 a month.
* If you're paying six percent interest on your mortgage right now, it might feel like a no-brainer to try and refinance to a 3.5 percent interest loan. But before you sign off on that new loan, you need to know how much refinancing will cost you.
It is not unusual to pay 3 percent to 6 percent of your outstanding principal in refinancing fees. Refinancing fees could include: Application fee, Loan origination fee, Appraisal fee, closing fees and more.
* How long do you plan on staying in your home? If you are planning to move within one or two years, refinancing might not be worthwhile for you.
For example, if you save $100 a month with your refinanced loan - but the loan costs you $2,400, you'll need to live in your home for 24 months before you'll start saving money. If you plan to move out of your house in the near future, then refinancing probably isn't the best idea.