Should I Refinance My Mortgage?

As mortgage rates are starting to trickle down, I’m getting a lot of questions about refinancing. Should I refinance? Should I not?

A very easy rule of thumb: if the interest rate is 1% lower than what your current mortgage rate is, then you probably need to look into it.

Everyone is different, and every situation is different. Historically, over the years, when calculating this for clients whenever I did mortgages and loans, anytime you’re talking about refinancing a 30-year fixed-rate mortgage, 1% is a good rule of thumb.

For example, if your current 30-year fixed-rate mortgage is at 7% and you could currently get it for 6%, look into it.

And the reason I’m saying look into it is because you’ve got closing costs when you refinance. So, are those costs worth it? When you take all that into consideration, with typical average closing costs, 1% is the amount that’s worth maybe refinancing.

The best advice that I can give you if you’re considering this: call your current lender, ask what their mortgage rates are, and ask if they have a special program in-house where they’re doing quick and easy buy-downs or refinances. They might be doing that.

Call around and ask, and get a net sheet of what your closing costs are going to be, what your principal and interest payments are going to go to, and all of those things. Then decide for yourself.

If you’re planning on moving in the next year or two, then it’s not worth it. You’re not going to recoup the cost of it. However, if that’s somewhere you’re planning on being and you’re not planning on jumping ship anytime soon, then definitely look into it.