Is Now The Best Time To Refinance Your Mortgage
Q: Gerald, mortgage rates are low but I don’t want to miss out on the lowest rates possible. Is now the best time to refinance my mortgage? Gary, Weehawken, NJ
A: If your mortgage has a higher interest rate compared to the mortgage rate you can get now given your credit score and income, then refinancing could be a smart financial move. The truth is that everyone’s personal financial situation is different so it’s best to make decisions based on your personal situation not based on generic advice. Historically, the rule of thumb is that refinancing is a good idea if you can reduce your interest rate by at least 2%, however, many lenders say a 1% savings is enough of an incentive to justify refinance. Bear in mind that lenders have a financial incentive to get you to pay the fees required to refinance your mortgage loan. Refinancing is not free, it costs money–money that you will either have to pay upfront when you refinance or over the life of your refinanced loan. Refinancing may be a smart move over time because as you pay your mortgage over time at a reduced interest rate, you will recoup the cost of refinancing. What this means is that it’s not smart to refinance frequently because every time you do you add thousands of dollars to your mortgage debt that you have to pay back. Thanks for your question, Gary.
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