Interest rates have been hovering around 5% – dipping to 4.875% a couple of weeks ago and rising to 5.12% this past week. With interest rates at these levels, you may be asking yourself, “When does it make sense to refinance?”
Acording to Kellie Allen of Guild Mortgage, the general guideline for refinancing is a drop in the interest rate of at least 1% from your current rate to the new rate. “I also like to see a “payback” period of 24 months or less on the closing costs.”
“Payback is very easy to figure. You take the monthly savings from your old payment to the new payment and divide into the closing costs for the refinance. That number represents the number of months it will take to “pay back” the closing costs. If this number is 24 months or less, then, not only will you have the immediate benefit of the monthly savings to your cash flow, but also when the pay back period is complete, you have actual true rate savings on the balance of your loan.”
“Additionally, there are other reasons for refinancing. These can include going from a 30 yr loan to a 15 yr loan, consolidating a current 1st and 2nd mortgage, consolidating consumer debt and/or if your current loan is adjusting soon and you would like to “fix” the rate.”
Kellie also strongly advises borrowers to get a Good Faith Estimate. A Good Faith Estimate is a report that allows you to see exactly what the new loan is costing you and what your new payment will be. When you talk to a lender, ask them to email or mail you the report. If they don’t, move on.
Have more questions? Give Kellie a call at 208-489-2824. She’s got the answers.
To refinance or not to refinance?
Interest rates have been hovering around 5% – dipping to 4.875% a couple of weeks ago and rising to 5.12% this past week. With interest rates at these levels, you may be asking yourself, “When does it make sense to refinance?”
Acording to Kellie Allen of Guild Mortgage, the general guideline for refinancing is a drop in the interest rate of at least 1% from your current rate to the new rate. “I also like to see a “payback” period of 24 months or less on the closing costs.”
“Payback is very easy to figure. You take the monthly savings from your old payment to the new payment and divide into the closing costs for the refinance. That number represents the number of months it will take to “pay back” the closing costs. If this number is 24 months or less, then, not only will you have the immediate benefit of the monthly savings to your cash flow, but also when the pay back period is complete, you have actual true rate savings on the balance of your loan.”
“Additionally, there are other reasons for refinancing. These can include going from a 30 yr loan to a 15 yr loan, consolidating a current 1st and 2nd mortgage, consolidating consumer debt and/or if your current loan is adjusting soon and you would like to “fix” the rate.”
Kellie also strongly advises borrowers to get a Good Faith Estimate. A Good Faith Estimate is a report that allows you to see exactly what the new loan is costing you and what your new payment will be. When you talk to a lender, ask them to email or mail you the report. If they don’t, move on.
Have more questions? Give Kellie a call at 208-489-2824. She’s got the answers.