How to Know If I Should Refinance My Mortgage?

Sure, interest rates for mortgages in the US remain at historic lows. But should you refinance again?
Although lower interest rates always sound enticing, the expense involved in a mortgage refi may actually not be worth it.


The typical rule of thumb is that if you can reduce your current interest rate by 0.75-1% or higher then it might make sense to consider a refinancing move. First step is to calculate your monthly savings should you do the refinance, for example:

Suppose you have a 30-year fixed rate mortgage loan for $200,000. Currently, you have a 6.5% interest rate (fixed), and your beginning of month payment is $1,257. Now, rates are at 5.5% interest (fixed), this could reduce your monthly payment down to $1,130.This would be a monthly savings of $127, or $1,524 annually.

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