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Is Now the Right Time to Refinance?

Refinancing a mortgage is currently the most brought-up topic for many homeowners that I speak with on a daily basis. With interest rates lower than they have been in some time, many want to know what to do. Below you will find a couple common themes that I have heard as well as my answers to those concerns.

Theme One: How would I determine whether it makes sense for me to refinance?

To figure out whether it’s in your best interest to refinance now or later, you need to calculate the point at which you would break-even.

This is the point in time where you make up the amount of you paid in fees for the new mortgage through your monthly savings you realize by refinancing. This is done by dividing the mortgage fees by the monthly savings. For example, let’s say you would save $125 a month by refinancing, and the closing costs would be $3,500. Your break-even point for this example is 28 months ($3,500/$125=28). NOTE: Be sure to not count “pre-paids” in this calculation because those costs will be washed out when you get your refund from your current account holding your pre-paid items such as taxes and insurance.

In this example, if you plan to live in the house for more than 28 months, you should refinance because you would save money in the long run. If you intend to sell the house before 28 months, well, you can see that you should sit tight with your current loan.

To figure your monthly savings, you may contact me to get started on a completely free Total Cost Analysis for your scenario.

Also, keep in mind that you do not need to start over with a 30-year note – assuming you started with a 30 year note to begin with. For instance, if you entered in to a 30 year fixed rate note four years ago, and you want to refinance now, but still pay off the loan in 26 years, that can be done. This is known as amortizing the payments over 26 years instead of 30 and I can easily help you figure out what your payments need to be to make that happen.

Theme Two: How soon is too soon to refinance?

Really, this is not a concern at all; if your break-even point is acceptable to you, refinancing can be done at any time.

Have questions about this?  Give me a call at 800-627-1925 x5144 or email me.

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