Refinancing a mortgage is the process of paying off the old mortgage and getting a brand new one. While there is a cost to refinance a mortgage it can be worth it in savings. The main objective of refinancing is to lower the monthly payments. You can also change terms like going from a 30 year fixed to a 15 year fixed. A common misconception is refinancing is like burning one bridge at a bank and moving to another. That can not be far from the truth, most times you might actually go back to the same bank to lower closing fees.
Is It A Good Time To Refinance
As of writing, these rates are at the lowest they have been for a while. We are seeing a lot of rates below three percent. So if you got your mortgage three years ago with a four or five percent interest rate then it would be a great time to refinance. Refinancing is a great way of debt consolidation or lowering your monthly debt and the federal government recognizes many people have increasing debts so they have created programs to allow banks to offer lower rates. If the cost to refinance a mortgage and the savings are right it is a great time to refinance.
Overall we believe it is a great time to refinance your mortgage. Even if you might be seven or ten years already into a mortgage it can still make sense. Many people might not want to go back to another 30-year mortgage because they have spent so much time paying off their existing mortgage. While that does make sense going back to a 30-year mortgage might not be so bad for a couple of reasons. For one, you might sell the house sooner than you think. In that case, it doesn’t really matter how long you have left since you will be paying it off once you sell the house. Secondly many argue that since rates are low and the costs are low you can take the savings and put it in the stock market which can return higher interest than what you are paying now. This option is more complex and is not for everyone but shows that you should take advantage of cheap money.
Cost To Refinance A Mortgage
There are multiple payments that go into refinancing a mortgage. It can cost you from $3,000 to $6,000 to refinance depending on certain factors. Fees you will have to pay are title company’s fees, Florida (or any state) Fees, Credit report fees, escrows, bank fees, and more. We here at MJS do not charge clients application or origination fees but that might also be part of it. These are all the closing costs you will need to pay to get the new mortgage. It is the cost of moving paper essentially if these costs seem like a lot do not worry as there are ways to lower these costs. Here’s a great article about the current situation and where rates are going.
Ways To Lower Cost of Refinancing
- Speak to your mortgage broker and see what lenders are offering. Many times lenders will offer credit to cover some of your closing costs if you join their bank.
- The opposite of that is speak to the lender you are already at and many times they will waive bank fees and swap your escrows if you refinance with them.
Is The Cost To Refinance a Mortage Worth It?
Just because you are saving money each month does not mean the refinance is worth it. A good way to see if the refinance is worth the closing cost is if the money you spend at closing can be recouped from the payments in less than two years. For example, if you spend $4,650 to refinance your mortgage to a lower interest rate and save $215 it would take 21.6 months (4650/215) to recoup that money in monthly mortgage payments. It would be worth it since it takes you less than two years to break even on the refinance.