Lower your interest cost!

In the current climate of low-interest rates, I get the questions all the time; if it is a good time to refinance my mortgage. Why is this question so important? A large portion of what we pay on our mortgage is the cost of the interest. If you reduce the amount you pay in interest, you reduce your monthly payment.

An extra $200 in your bank account can go a long way for most Americans. Unfortunately, refinancing when interest rates go low is not free. There are costs associated with refinancing. Homeowners have to weigh the cost of refinancing vs. the savings they receive for a lower interest rate.

On average, you can expect to pay 2-5% of your loan on your financing fees, known as closing costs. The most common costs you will pay are

• Loan Origination Fees – Sometimes referred to as an administration fee, application fee, underwriting fee, or document preparation fee. This is the cost for the bank to file the paperwork you have to sign at closing. Remember, this fee is up for negotiation. Don’t be afraid to push back or do some comparison shopping
• Appraisal and Inspection Fees – The lender must do its due diligence when refinancing your mortgage. This means ensuring the value of your home before they refinance your home. This will result in a fee of around $200 – $700.
• Mortgage and Title Insurance Fees – To ensure the bank can place a lien on the home, a bank will ensure the title is free and clear. If necessary, this is also where PMI will be placed on your mortgage.
• Other Fees – Given the location and lender, there can be additional fees that you will have to account for when you refinance. This can include but is not limited to Discount Points and Early Repayment Fees.

After you have applied, and you have received your new monthly payment estimate, compare the monthly savings to the closing cost. Best practice is to refinance if you can recoup (accumulated savings) your closing cost within 2.5 years.

In low mortgage rate environments, it is always a good idea to look at refinancing your home. Reach out to your local lender if you feel you can benefit from a refinance. If you have any other questions, please click the link below to select a time for us to speak.