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Is it wise to refinance your mortgage during the first year of a new loan with a lower interest rate?
My husband and I bought our house in March 2010 by a 30-year fixed rate of 5.75%. Our loan officer has notified us that now we can refinance at 4.75% or 5.00. I was wondering if it is wise to do so within the first year. Im assuming this is the lowest rate that we will ever get, but with the economy not I know. Any advice would be greatly appreciated. Thank you.
This seems to be a question we all begin to wonder. While refinancing a mortgage can save money in the long term, it is important to the question “How long will it take before I start saving money?” To resolve this, start with the amount you will save by reducing your monthly payment. Then add up all the costs associated with refinancing and divide the total by your monthly savings. This will reveal the number of months it will take to reach equilibrium. To give an example, suppose that the refinancing could reduce your payment of $ 1,000 per month to $ 800 month (which saves $ 200 a month.) Your prepayment penalty, closing costs and points add up to $ 2600. Divide $ 2,600 by $ 200 and this he said to take 13 months to realize the savings. Keep in mind that its point of balance, even depends on other factors, including your tax situation and whether you pay closing costs up front or roll them back into the main new mortgage. It is important to shop around before deciding to refinance since the rates offered by lenders can vary by almost 1%. It is also advisable to make calculations important information based on your new loan to support its decision to refinance. Since its loan officer has already said it can you refinance in the 4.75 or 5%, may be a good idea to request a custom quote and detailed. That way you can make those calculations and see if refinancing would be economically beneficial. Free, useful mortgage calculators, visit:
Refinance Mortgage Rates
