REFINANCING

Should you be considering refinancing ?

If you currently hold a mortgage with an interest rate of 8% or better, you might want to consider refinancing.

With a mortgage refinance you are really paying off your existing mortgage with the funds of the new money you are borrowing at a lower price (interest rate).

Remember that refinancing involves closing costs, which are additional costs associated with processing the new loan, it makes sense to refinance for an interest rate that is at least 1.5% lower than your current rate and if you plan on keeping the property for a minimum of three years.

Example:

Current mortgage: $140,000 with an interest rate of 8.75% 

Current payment: $1,101

New Loan:  $140,000 with an interest rate of 6.5%

New Payment: $884

Savings: $217/month

Cost of new mortgage (closing costs): $3500

Worth doing? Yes, because savings of $217/month totals $7,812 over three year period which far exceeds initial cost of new loan ($3500).  And over the life of a thirty year loan this refinancing would save $78,120.