Let’s just get right to it, shall we? I know what you’re thinking—
Mortgage payments are supposed to be fixed. How in the world did you REDUCE your monthly payment? I’m glad you asked!
The fine art of Refinancing
Right now, interest rates are lower than they have been in the history of, well— F O R E V E R! So, it was a prime time for me to convert my 7/1 ARM to a 30-year fixed mortgage. If my calculations are correct, and they are, refinancing has:
- reduced my monthly payment by nearly $100/month,
- saved me over 15% and interest payments (over the life of the loan)
- reduce the total number of payments so I’m mortgage-free 4 years sooner!
The magic of the refi is based on the idea that the amount you need to borrow today to pay off your current loan is less than the amount you borrowed on the original loan. Couple that with the lowest interest rates EVER, and you’ve got yourself some savings!
Three indications that a refinance could work for you
1 | The refi rates in your area are LOWER THAN what you’re currently paying.
It goes without saying, but head to The Googles and confirm that the refi interest rate is less than the rate you currently have.
Even if the rate is slightly higher than what you’re currently paying, a refi might still make sense if you’re looking to reduce your monthly obligation AND you have a ton of equity in your home. Check with your mortgage advisor and run the numbers to make sure!
2 | Your payoff balance is LESS THAN your original loan amount.
The difference (your equity) should be at least the amount of the closing costs for a refi to even start to make any sense.
3 | The value of your home is AT LEAST as much as the balance you need to refinance.
Even though it’s a refi, the bank still needs to make sure that the collateral (the house) is worth what you’re borrowing on the new loan.
If any of the following ring true for you, now might be a good time to reach out to mortgage expert to discuss refinancing your current loan.
