By Brent Muller

Most people have probably heard the saying, “You should refinance only if you can lower your mortgage interest rate by 1% or more.” The truth is that it really depends on your situation. There are multiple variables that can help you make your decision.

What is the size of your loan? A $400,000 refinance does not cost twice as much as a $200,000 refinance, but the savings is twice as much with the same interest rate drop. Basically, if a 1% interest rate drop makes sense for a $200,000 mortgage, then a .5% rate drop should make sense for a $400,000 mortgage. On the other hand, you have to drop your rate more to justify refinancing a very small loan amount.

How much are the closing costs and how long are you staying? Obviously, the lower the closing costs, the sooner you will recoup those costs in the form of lower monthly mortgage payments. If you are moving in the near future, then you may not have enough time to recoup your costs. If you can save enough to pay yourself back the costs in the first several years, then it may make sense to refinance your mortgage.

For more information, please call or email Wealth Enhancement Mortgage Services.

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