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Should You Bother Refinancing Your Current Mortgage Rate?

Yobi Song
Senior Mortgage Loan Officer
NMLS #470764
Mann Mortgage, LLC

Has “mortgage rates are at record lows and you could save a ton of money by refinancing” started to sound like a cliché? Well, I’m going to say it again anyway.

I’ve repeated this to friends on many occasions, and they sometimes bring it up to me. But when it gets down to actually doing something about it, I’m sorry to say there has been very little follow-through. They are among millions of home owners out there with “refinanceable” mortgages well above the current interest rates. So, you have to ask, “what’s holding them back?”

Don’t Have the Time to Refinance?

Have they not bothered looking into a refinance because they don’t have any spare time to do so? Or is it because the task is seemingly so daunting that they avoid it altogether. There are probably numerous reasons, but it still blows my mind that more home owners don’t take action, considering “how much money you can save!”

How Many Home Owners Are Actually Missing Out?

Well, a couple of months back a company named CoreLogic noted that twenty million borrowers with positive equity, or 53 percent of all “above-water borrowers,” had above market mortgage rates. They defined an above market mortgage rate as 5.1 percent (or higher), which is more than a percentage point above current rates for the popular 30-year fixed-rate mortgage. Pretty surprising, no?

That number might seem surprising considering all the news about the “record low rates” that seems to permeate the airwaves. Based on my own experience, I’m afraid it’s accurate, but it still doesn’t make sense that people choose to continue making inflated monthly mortgage payments.

All that said, it also doesn’t make sense for everyone to refinance all the time. Like anything else in the world, it can be a good or bad idea, depending on your unique financial situation and future plans. But if nothing else, you should at least look into refinancing your mortgage. After all, there are few other things you can do in life to save so much money so easily.

The Refinance Rule of Thumb?

If you’re considering refinancing your mortgage, you may have looked to the “refinance rule of thumb” to help make your decision. Of course, there isn’t a single refinance rule of thumb. A popular one is that you should only refinance if your new interest rate will be two percentage points lower than your current mortgage rate.

Only Refinance If the New Mortgage Rate is 2% Lower?

Biggest misconception! If your current mortgage rate is 6%, that rule would tell you refinance only if you could snag a rate of 4% or lower. But clearly this rule is much too broad, just like most generalizations. When it comes down to it, a refinance decision will be unique to you and your situation. This old rule assumes most mortgage amounts are pretty small, unlike the jumbo loans we see today.

If you or anyone you know would like to know how much could be saved by refinancing an existing mortgage, please contact me at 808-330-4995 or stop by our Downtown office at 1188 Bishop Street #PH2, 36th Floor.

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