With all the federal changes that have happened recently, most of you have heard that interest rates have dropped, dropped, and dropped some more. With that, many people have begun thinking about refinancing their home.
The answer depends on what your plans are.
When you refinance your home, it restarts your amortization, which means that the first few years, you’ll be paying almost all of your payment to interest and not to the principle of your loan. If you plan to move in a couple of years, it may make more sense to not refinance and make payments where more of your money actually goes towards paying down the principle.
You can run a simple calculation to see if the math makes sense for your situation. Let’s say it costs $3,000 to refinance your loan (Quick tip- many times, you can just roll that fee into your actual loan and not pay for it up front) and that refinancing will save you $100 a month. That means it would take 30 months just to break even. Will you be there for 30 months? If not, it wouldn’t make sense to refinance.
Now, if you have mortgage insurance on your current loan (especially if you got an FHA loan), it could save you a lot of money to refinance and be able to drop that fee off of your payment entirely!
If you want to refinance or wonder if it would make sense for your situation, please feel free to reach out to me and I can help you evaluate whether or not it would be a win for you!