With interest rates low, is a refinance right for you? There are a few things to keep in mind when deciding. Watch this week's Arista Advice to find out if you're in a position to save and win from a refinance.
Hello, welcome to Arista Advice. Hope you're well.
Question of the week is: "With interest rates very low, is a refinance right for you?"
Attached here is the graph showing the 30-year mortgage rate. You can see that it has significantly dropped and now is a good time to be looking at refinancing. If you have any outstanding debt on your home.
The cost to refinance a mortgage is usually between 2 and 5% of the unpaid balance.
A general rule of thumb of refinancing is if you can save 2% all the way down to 1%, you win in refinancing, and you're able to put money back in your pocket instead of sending it to the mortgage company.
Refinancing also makes sense the longer you expect to be in your home. It would not be cost effective if you plan to move soon. Another opportunity to refinance is if you want to go from a 30-year to a 20, a 15, or a 10.
Let me share an example with you. You'll see here a $200,000 outstanding loan balance at 5.5% for 30 years, you have a monthly payment of $1,147 principal and interest. By refinancing $200,000 unpaid balance at a 3.21% interest rate gives you a new principal and interest payment of $874.
A monthly savings of $273 that you can put back in your pocket and into an investment account that appreciates over time.
Things to remember:
Number one: check your current interest rate.
Number two: calculate the differential cost of the new loan and the break even point.
Number three: discuss your holding period on the current home, and number four: enjoy life and pay off your mortgage.
Hope you're well. Have a great week. Please remember to go to Aristawealth.com and check out our past videos and tools and tips to help you to become a successful investor.
Hope you're well. Have a great day, and we'll talk to you soon.