Interest rates are very low now and it might be a good time to refinance a mortgage or even a car loan. For example, if you have a $200,000, 30 year mortgage at 8 percent, your monthly payment will be $1468. If you can now get a 5 percent interest rate, the payment will be $1074. Of course there are fees associated with a refinance. Go to the
refinance page to determine if refinancing your mortgage is best for you.
Another perspective:
Refinance your mortgage if: it will save you money, you need to lower your monthly payment, need cash, or need to change the terms of your mortgage. This all depends on the interest rates, closing costs, the length of the mortgage, and the length of time you will be staying in the house. It doesn’t make sense to refinance if you are planning on selling in a year or two. Do you have to pay the closing costs up front, or are they just added to the principal so you pay them off (with interest) over time?
Start by talking to your current lender and getting a proposal. This proposal should include your closing costs, new monthly payment, new interest rate, new length, and the total interest and closing costs you will have to pay over the length of the new mortgage. Compare the total cost of the refinanced mortgage with the total cost remaining on the old mortgage. Are you saving anything? And if so, how much per year. If you are saving $100 per year, it probably doesn’t make sense to go to the bother of refinancing. However, if you are saving several thousand per year, maybe you should do it. All that assumes you are staying in the house and will pay it all off eventually. The fewer years you will own the house, the less you save. After working with your current lender, it may make sense to shop around for proposals from other lenders.
Here’s another way to look at it. Find your total closing costs. If your new monthly payment is lower, then how many months will it take you to get back these closing costs. Once you have recouped the closing costs, you are coming out ahead. For example, if the closing costs are $2,000 but your new monthly payment is $100 less, then you will pay off the closing costs in about 20 months. Then you will be coming out ahead by $100 per month unless the new mortgage is for a longer term.
You may also need to refinance in order to take out some of your home equity. If you currently have 15 years remaining on your mortgage but can refinance for 30 years at a lower interest rate, you may be able to come away with a substantial cash payment. Of course, you will eventually have to pay it all back or lose you house.
If you currently have an adjustable rate mortgage (ARM), your interest rate gets adjusted up or down periodically. If you wish to change to a fixed rate that will not change, you may need to refinace to do that.
Some people will be most interested in the total cost savings over the length of the mortgage. Others will be more concerned with getting a lower monthly payment. Still others many be most concened with getting some of their home equity in the form of cash. Which ever you are most interested in, make sure to study the numbers and proceed cautiously.