Should
You Refinance?
 Once you have a mortgage, you’re
set, right? Not really—though
your parents might have kept the same
mortgage for 30 years, today’s
fluctuating mortgage rates keep you
on your toes. So when should you refinance?
If you can get a no-cost loan at a
rate that’s lower than you are
presently paying, why not refinance?
Well, because it’s a pain in
the you-know-what, that’s why.
How much would you need to save to
make it worthwhile to refinance? It’s
up to you, but most of us would be
willing to settle for a clear 1 percent
savings each year.
Assume the cost to
refinance will average 1 percent of
your loan amount (unless you choose
a no-cost loan with higher interest
rates) plus any points you pay. One
important factor in deciding whether
to refinance is how long you intend
to keep your house. If you plan to
keep your home just a year, it probably
doesn’t make sense to refinance
at all, no matter how much your interest
rate will decline. But if you plan
to keep your home for ten years or
more, even a 1 percent reduction in
interest rates makes sense for you.
Here’s a chart that you can
use to decide whether it pays to refinance
your mortgage.
Number
of years
you will keep the house |
Minimum
interest rate reduction |
2 |
2.5% |
4 |
1.75% |
6 |
1.5% |
8 |
1.25% |
10 |
1% |
At WIFE we welcome your comments. Please feel free to contact us.
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