![]() In that situation, if you think you'll be moving in three years, it could make sense to keep your current mortgage.īe advised if you're well into your existing mortgage: refinancing could end up costing you more money in the long run, even if your new payment is lower. If your closing costs are $8,000, it will take you 40 months to break even ($8,000 divided by $200). For example, let's say your new monthly payment will be $200 lower. To figure out your break-even period, divide the closing costs by your monthly savings. ![]() Before refinancing for a lower rate, be confident that you're going to stay in the home long enough to recover those costs. To cover the appraisal, title search, points, origination fee and other costs of your new mortgage, expect to pay fees equal to 3% to 6% of the loan amount. But you may benefit from smaller differences if the new mortgage has below-average closing costs. This positions you to slash your interest expense and breathe easier with a lower monthly payment.Īn old rule of thumb suggests refinancing if the interest rate on your new mortgage is 2% lower than your current one. The most common reason for refinancing a mortgage is to take advantage of a drop in interest rates. Here are several sound reasons for refinancing into a new mortgage with different terms. ![]() As interest rates change and your financial goals evolve, it pays to keep an eye out for something better. Mortgage debt is a long-term financial commitment, but you should always watch market conditions. ![]()
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