Important Reminders about Refinancing

I read an interesting article over the past weekend on Bloomberg about “How to Procrastinate Better”. The opening salvo discussed how a significant number of people eligible to refinance their mortgage missed out on a major refinancing opportunity during the financial crisis, costing themselves tens of thousands of dollars. The article goes on to say how well-timed reminders can help beat the costly procrastination bug.

Since we’re on the subject, please use this e-mail as a reminder to consider refinancing now. Mortgage rates are near their lows for the year and about ½% lower than they were one year ago. The average 30-year fixed-rate mortgage is around 4.2% and the 15-year is at 3.2%.

So if you purchased a home or refinanced in late 2013, have a mortgage rate in excess of 4.6% (or 15-year at 3.75% or above) or have an adjustable-rate mortgage that you want fixed (or vice-versa due to time horizons or risk tolerance), it would be foolish not to explore refinancing at this time.

This may be the last best time to do so. The Mortgage Bankers Association projects the average interest rate on a 30-year fixed-rate mortgage will be 5.2% at this time next year. Every few thousand dollars of savings can make a major impact on your financial future and it’s really not that much of a hassle to go thru the process.

Let me explain…Consider your have a 30-year fixed rate mortgage at 5% that you’ve been paying on for 3 years that is now down to a $400,000 balance. If you refinanced that mortgage now to another 30-year fixed-rate mortgage you could lower your payments by about $300 per month (or $3,600 per year). Even if you wanted to pay it off on the same schedule (27 years) you could still lower your payments by $190 per month. Under that scenario, you’d save in excess of $60,000 over the next 27 years with this refinance.

Depending on your current mortgage interest rate, this might be the best investment of a few hours of your time that you’ll ever make. My past refinance cost me about 3 hours of my time. If time is money, that’s like you working for a rate of $20,000 per hour. That’s a sum of money that is worth getting off your tush for.

After the recent interest rate declines, the biggest refinancing mistake is probably not exploring a refinance at all. If your are confused about the process or worried about getting taken advantage of, please use me as a resource.