Should you refinance your mortgage? This is a question we’ve been getting more and more frequently as interest rates have come down. But like any good financial planning answer – it really depends!
It depends on a lot of different variables.
Namely, what are the interest rates? What is your current interest rate and what is the new interest rate you might be eligible to qualify for?
Secondly, what are your closing costs going to be? How much is it going to cost to close on a refinanced loan?
And finally, how long do you plan to stay in your existing home?
Once we have these pieces of information, we can say – in what case is this scenario better than that scenario? We like to look at a couple different ones just know know that we will meet somewhere in the middle.
Refinancing Interest Rates
The things we are evaluating when we are reviewing these is how much interest are you going to pay over the remaining life of the loan. So that is really important because if you are paying more interest, that is more money we are paying to the bank and we don’t necessarily have to be paying otherwise.
Refinancing Closing Costs
Next is how long is it going to take to earn back how much we paid in closing costs? If we closed on a loan, but it is going to take 10 years to earn what we paid on those closing costs and we plan to move within 5 years, then maybe it’s not the best deal.
Refinancing Monthly Payment
And finally, we want to include, how much your new monthly payment is going to be. If your monthly payment is going to drastically change, then maybe that’s not going to work so well for cash flow.
You want to keep in mind all these different factors when evaluating the plan and what makes the most sense for you and your family and help give you the best answer possible.
So if your current mortgage rate is high and it has been some time since you’ve evaluated your loan, give us a call. We’d love to sit down and help you figure out should you refinance or what makes the most sense for you and your family.
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We are financial advisors in Deer Park and Barrington, IL. A team with a passion for helping others design a path to financial success — whatever success means for you. Each of our unique insights fit together to create broad expertise, complete roadmaps, and creative solutions. We have seen the power of having a financial plan, and adjusting that plan to life. The result? Freedom from worrying about the future so you can enjoy today.