Despite buying a new home and securing a decent mortgage rate of 6.125 (traditional 30-year fixed) in October of 2008, homeowner Janice decided the time was right for her to refinance in February in 2009.
The result was a new rate of 4.875% (same terms as original loan), with no points and reduced closing fees. If Janice is to maintain this mortgage to its full terms the total savings will be close to $50,00o.
Depending on your scenario, refinancing now is an excellent way to save on your mortgage as interest rates are at historic lows. Janice said, “The move just made financial sense, since we [her husband and herself] plan on staying here for at least ten years.”
By refinancing her mortgage, Janice is saving over $165 a month. Sure it will take her about two years to break even on the closing costs, but since she and her spouse are committed for the long hall, the expense and effort was well worth it.
Those who are either in an adjustable rate mortgage or can reduce their fixed mortgage rate by a full percentage point should start crunching the numbers to see if refinancing can help them save on their mortgage payments. The decision could come down to something as simple as using an online refinancing or mortgage calculator to see if paying the upfront fees such as appraisal costs, title transfers and notary public charges is worth the expense of refinancing your current mortgage.
Individuals contemplating refinancing their mortgage first need to address their long term goals to ensure that any steps take are well worth it.
If you are considering refinancing to save money you need to commit to at least five years in your current home, calculate the amount of closing costs and the break even point of the investment and then decide if refinancing your mortgage to save money is the right strategy you and yours.