Have you seen today’s interest rates? If not, let me be the bearer of good news: 30-year fixed rate mortgages are averaging 3.66% right now. 15-year fixed are averaging 3.15%. These may be (depending on the source) historic lows. But even if they’re not, they’re really good. And they may have you wondering if now is the time to refinance.
To answer that question, you have to answer a few others.
If you answered any of those questions with a yes, it’s time to at least look at a refi. The ultimate barometer of whether a deal will make sense for you will be, after you shop for a rate, whether you expect to stay in the home long enough to recoup the cost of the refinance. I’ll let a quick example do the talking: If you took out a $200,000, 30-year fixed mortgage in 2018 at an 4.5% interest rate, your monthly payment would be $1013 (without taxes and insurance). Refinance now at a rate of 3.66% and your new monthly payment could be $916 — a savings of $97 a month. If the refi cost 2% of the home price or $4,000, which is typical, you’d have to be in the home 41 months to break even. If you’re not planning on staying that long the deal isn’t worth doing. If you’re planning on staying longer, go ahead.
Convinced? Here are some tips to make your refi as painless as possible:
With Rebecca Cohen