If you've refinanced in the last 2 years or have a really great interest rate on your home, you have probably heard that rates continue to drop. And, you may be asking the question, "Is it worth it to refinance if I'm only saving 1% - or less?"
The stock answer is,… "maybe."
The truth is, refinancing is worth it when you can recoup the costs of refinancing – which includes any amounts added to your current balance – before you sell the home.
Once you have recouped the costs for the refinance, you are experiencing real savings with each payment that is lower than your previous mortgage.
The Big Question: How Do You Know When You Have Recouped Your Expenses?
One way to know when you have recouped your expenses and started actually saving money is to do this comparison:
- Get the current amortization schedule for your mortgage. (the payment schedule with any adjustments made)
- Find your next payment date in the schedule, and look at the beginning balance for that payment.
- Now compare that to an amortization schedule for the new proposed loan. The new loan balance should include all your closing costs, etc., rolled into the loan amount.
The 1st payment balance on the NEW loan represents the beginning balance of your current loan, including any costs for the refinance.
- Now follow the balances - payment by payment - on both schedules until the balances match (within a few dollars). This is the date you will have reached recoupment, because there is no longer "extra" money in your payoff balance. You start saving money the very next payment.
This method works when the existing term on your OLD mortgage is exactly equal to the term on your NEW mortgage. (25 years left on OLD mortgage – refinancing to 25 year term on NEW mortgage.)
If you are not matching terms exactly, it is much more convoluted, and very difficult to explain how to compare.
You can do this exercise yourself – OR – there is an easier way,… contact one of our Home Loan Specialists and they can prepare your Free Home Loan Report that will show your loan options and where you might be able to save. They can find that recoupment point for you so you can make a wise decision.
Here's what Dave Ramsey says about the Free Home Loan Report:
Here's what the Free Home Loan Report looks like, and how you can get your personalized report:
My Free Home Loan Report
Quickly identify which loan option is right for your personal situation.
Here's what you get in your personalized Home Loan Report
Know Your Monthly Savings AND
Your "Debt Free Point"
See Effects Of Earlier Payoff And Interest Savings
All In One Easy To Read And Navigate Presentation
And much, much more..
Get your personalized Free Home Loan Report and make the right decision for your family!
Get Started with Churchill Mortgage
Or Call us at 1-888-562-6200 and speak with a representative today!