Interest rates are generally low right now and you may be able to swap out your old, higher interest rate mortgage for a new one with lower rates. Refinancing may seem like a no-brainer…but it is not a wise financial move for everyone. Before you jump in with both feet, reach out to Scott Bennett at 503-703-4699 or scott@altmo.com to talk about your answers to the following questions:
What are your goals?
Lowering interest rates alone isn’t necessarily a good reason to refinance. But depending on your goals, refinancing could be the right move. For most, the goal of refinancing is to lower monthly bills. For others, shortening the term of the loan and becoming mortgage-free several years sooner is the goal.
Is refinancing worth the cost?
There are closing costs related to refinancing. These include things like appraisal, underwriting, title, etc. If your closing costs are $3,000 and you can save $200 a month by refinancing, it will take 15 months to break even. But…if your savings are only $50 a month, then it will take or five years to recoup the closing costs.
What are the downsides?
Sometimes refinancing does have potential downsides. Taking a “cash out” refinance, which lets you refinance the remaining amount of your mortgage in addition to more money, may or may not be a good idea depending on what you want to do with the money. Sometimes refinancing adds more years to your loan. A 30-year mortgage could quickly turn into a 40- or 45-year loan through constant refinancing.
Have questions? Reach out to Scott Bennett at 503-703-4699 or scott@altmo.com to talk about your situation.
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