When Should you Refinance Your Current Mortgage?
There are many questions to determine if, and when, you should refinance your current mortgage. Some of the most common are:
How much will I save on my monthly payment? Will a refinance remove PMI in addition to lowering the interest rate?
How much will my refinance cost? Costs typically include escrow & title fees, along with typical closing costs. Total cost to refinance range from $1500-$5000.
What is my “break even” period? How many months will it take to recoup the cost to refinance? A payback period of 12 months or less is considered good.
Do you plan to stay in the home long enough to realize the savings? You don’t want to refinance if you plan to move within the 12-18 months, regardless of the break even period.
There are new programs available that significantly lower the costs of refinancing to below $2000, by eliminating the need for title insurance. These are not yet available in every zip code, but much of the Phoenix metro area is covered. If you qualify for these, your refinance cost can come in under $2000 (instead of closer to $5000), which significantly lowers the break even period.
Refinancing can be a great financial tool if done strategically. Asking yourself these questions can help ensure that you're making the right decision based on your specific needs and goals. If you’re interested, give me a call to discuss your specific situation, answer any questions you may have, and assist with the calculations to see if refinancing is a smart financial move for you.