If I told you that you could spend a few hours of your time and it would translate in to thousands or even tens of thousands of dollars saved – would you be interested? Well, refinancing is one way that many of us can do that.
Refinancing Video
Recently I have been looking into refinancing again since rates are still very good. In my case, I am paying a 5.5% rate on my mortgage and from comparing some quotes I can see that I can easily refinance to a 4.5% rate (or lower). 1% may not seem like a lot, but that 1% difference will save us $171/month on our mortgage payment. This will save us over $2000/year! And over $55,000 for the life of the loan. Not bad for just a few hours worth of work!
Assuming average closing costs being about 2-3% of the loan amount we would break even sometime within the 2nd year.
The thing about refinancing is that it can feel overwhelming and complicated. There are a bunch of closing costs and you while you can and should get a good-estimate from prospective lenders, you still aren’t likely to have all of the exact numbers to do the calculation.
But, if you are planning on being in your home for a while and you see that rates are 1% or more below what you are currently paying, you should at least spend some time figuring out how much you could save.
I mean seriously, if you can spend just a few hours and save thousands of dollars a year for the length of your loan, isn’t that a better investment of your time than watching American Idol?
Homework:
1. Check the rates in your area to see how they compare to your current rate.
2. If you find a 1% difference and plan on staying in your home at least 5-10 years, use this calculator to see how much money you can save.
3. Find a few mortgage lenders and ask them for good-faith estimates of their closing costs. Pick a good one, ask questions until you are comfortable, and do something smart with all the money you are going to save!
{ 4 comments… read them below or add one }
While in the process, try to refinance to a shorter term mortgage. Next step, overpay every month. That is how we paid off our house in much less than 15 years.
We would love to refi, but we are currently “under-water”.
My hubby lived in this house before we got married (2010), and he had refi-ed in 2007 at ~$120k when the house was valued at $157. But we just had the house appraised to see if we could refi at a lower interest rate (we are at 6ish I think?), and the house appraised for $78k. Yikes! What a change. There have been a lot of foreclosures in the area that have made the market tank here in Michigan. So for now, we just keep trying to pay it down.
If you are underwater in your home , you may want to explore the DU Refi plu s program or the Freddie Relief refinance. They are programs for people whose mortgages are owned by Fannie or Freddie ( most of us) and allow people to refi with negative equity. Most lenders offer the programs .
Our refi guy at the bank looked at that, but the house would’ve had to appraise for closer to 100k in order for us to refi.
Too bad! It’s alright though. At the time, it was a great rate and price for the house, and I’m expecting us to live in it for a while — so we’ll just slowly, but surely, work on paying it off. And if the market goes back up, and rates are lower than what we have, then we’ll refi!