Once more, mortgage rates have fallen to historic lows and, for those home owners who refinanced not too long ago, the question is: does it make sense to refinance yet again?
While you may think it does not make sense for you to refinance so soon, you may find yourself missing out on monthly savings if you don’t. And, if you happen to be a home owner with an adjustable rate mortgage, it is probably time to figure out whether it’s in your best interest to refinance now and take advantage of a low fixed rate.
The best way to approach this question is to calculate cost versus benefit and your recoup time meaning the time it takes to make up in monthly savings from a reduced payment the amount that you pay in fees for the refinance. Since there are a number of ways to structure your loan, the recoup time will vary. For example, a zero point or no-cost loan will require minimal fees, but will have a lower month-to-month savings.
One way to secure the lowest interest rate possible is to pay points. You can do this by paying additional fees to the lender at closing to lower your mortgage rate. The cost of each point is equal to one percent of the loan amount. Although paying points would involve additional costs, it would result in greater month-to-month savings than the no-cost loan. Your recoup time may take several years before realizing the cost benefits of paying points.
With rates so low, even the most cautious home owner could reduce monthly payments and save money with a no-cost loan. For someone who is unsure of their future plans and may want to sell their home and move in the future, a no-cost loan could still result in monthly savings with no risk.
Depending on your situation and future plans, your loan officer can help you determine the best option for you. Call Guild Mortgage for a free analysis to find out if you will benefit from refinancing your mortgage.
If you plan to stay in your home for years, it is highly likely a refinance at this time will save you money long-term, and the benefits of paying points to lower your rate could easily outweigh the cost.