Couple Money

Looking at Refinancing Our House

refinancing house

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During last month's net worth review I was looking at some areas where we could save some money and noticed that refinance rates were looking incredibly well. While looking over our finances, it's looking like we may want to go ahead and see if we can snag a deal.

It looks like we're not the only one thinking of this:

REFINANCINGS made up 79 percent of all 2011 mortgage applications as of early October, according to the Mortgage Bankers Association, about the same level as last year but well above the 54 percent average of the last decade.

NY Times

Advantages of Refinancing

Before we jump into the paperwork and tedious work of refinancing our homes we looked at the benefits and drawbacks of refinancing.

Reduce Our Interest Rate

Who would've thought that rates would be as low as they are right now? We thought we had a wonderful deal almost 2 years ago with 5% for our 30 year mortgage. Now we're seeing some incredible deals. Now we're seeing under 4% for 15 year mortgages with various lenders.

With a lower interest rate (along with a faster timeline) we'd change where extra mortgage payments would go and redirect them towards student loans.

Pay Off Our Mortgage Sooner

Finishing our mortgage in 15 years is a big plus for a small increase in our mortgage payment. Not having a mortgage in about half the time is extremely tempting. According to one estimate, we could save over $40,000 in interest payments over the life of the loan by cutting the mortgage to 15 years.

Lower Our Monthly Payment

It looks like this contradicts the previous benefit, but long time readers know that we send in extra principal payments to speed up the mortgage pay off progress. Taking into account the extra amount along with the scheduled mortgage payment, the new estimated amounts would be less than what we're paying now.

Not Always a Smart Move to Refinance

With everything going for a refinance, you would think that it's a no brainer.That's not always the case. Depending on your circumstances, you may want to pass on refinancing your home. Interest rates aren't the only thing to consider.

For example, if you're planning on moving in the near future, you may not have enough time to recoup your costs. Refinancing, even if you stay at the same lender, does entails fees.

As with everything, you need to shop around and see if you can get the best deal for you and your family. We're checking several lenders, including our current one to get what we want.

Deciding if Refinancing is a Good Option

If you're trying to figure out whether or not refinancing is for you, there is a bit of financial legwork you should do. It's not terribly complicated and it'll give you a clear idea of what will put more money in your pocket.

Here's what you need to run the numbers:

Use any reliable refinance calculator (plenty of free ones on the web) and see the numbers for yourself. If you're looking for more insight, I highly recommend checking Sandy's perspective on Yes, I Am Cheap.

Looking Around

Right now we're looking around, seeing who can give us the best deal on a mortgage. I'll update here on what we find when all the estimates come in.

Thoughts on Refinancing Mortgages

How many of you have refinanced recently or thinking of refinancing soon? What are your reasons for/against refinancing?

Photo Credit: andrewmalone


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