The Update

The Real Deal on Refinancing: Is It Worth It?

It seems that every time mortgage interest rates drop to an “all-time low,” they’re destined to drop even lower. You may have refinanced several years ago and are now considering a mortgage refinance again because rates have fallen or you’re afraid they’re going to rise even higher. But, is it worthwhile?

Before you agree to meet with the next telemarketer who interrupts your dinner, consider the following:

• Amortization. In the early years of your mortgage, you pay more interest than principal. As the years go by, more of your payment is applied toward principal and less toward interest. Does going back to the beginning of a mortgage term make sense for you? Run the numbers and see what you’ll save monthly, but also calculate how little the principal will decrease in the early years of a new loan.
• Closing costs. Based on what you’ll save with the new mortgage, how long will it take you to recoup the closing costs?
• Points. If you paid points for a lower rate on your current mortgage, that money is lost when you refinance.
• How much longer are you planning to stay in the house? It’s not worth the cost of refinancing if you’ll be selling shortly.

All in all, the decision to refinance should be based on more factors than interest rate or monthly payment.

RGCU Mortgage Services

If you're looking to refinance your current home, or use your equity to finance DIY projects or consolidate loan, RGCU is here for you. Our mortgage services team offers a personalized experience to help you find your next home sweet home. Contact us today!