Should I Refinance?

With interest rates at historic lows, we have been receiving a lot of questions about refinancing and whether it is a good time to do that.  The answer is:  Maybe!  Two main factors that determine whether refinancing is a good idea for you are:  

• What is your current interest rate?

The larger the difference between your current interest rate and the interest rate you can refinance to, the more likely you will benefit by refinancing.  For example, moving from 5% to 3.5% is much more attractive than moving from 4% to 3.5%

• How much longer do you intend to remain in your home?

When you refinance, you incur something called “Closing Costs”.  Depending on the price of your home, these can be $4,000 – $6,000 or more.  The monthly savings that you receive each monthly by having a lower interest rate will at some point pass the closing costs you incur.  The point at which this happens is called the “Break Even” point.  For example, if you’re moving from a 6% rate to a 3.5% rate, your break even point may be 18 months, whereas if you’re only moving from a 4% rate to a 3.5% rate, your break even point may be 4-5 years or more!  If you intend to stay in your home for many years, refinancing to a lower rate may make more sense.

For more information on refinancing and whether it makes sense for you, give us a call!  We love talking real estate!