Is it time to refinance?
First International Bank
Story by Mike Mulwani, FIBT Director of Mortgage
Photos Provided by First International Bank and Trust
We understand, the prospect of refinancing may come with a little fear: you’ve heard it’s expensive and requires reams of paperwork. However, mortgage rates continue to sit at or near record-breaking lows. If you haven’t done so already, it may be time to consider, “Is now the time to refinance?”
To answer that question, you have to answer a few others.
If you answered yes to any of these questions, it’s time to at least consider talking to a lender. The ultimate barometer of whether a deal will make sense for you will be whether you expect to stay in the home long enough to recover the cost of the refinance. Here’s a quick example from SavvyMoney.com.
If you took out a $200,000, 30-year fixed mortgage in 2018 at a 4.5% interest rate (4.600% APR*) your monthly payment would be $1,013 (without taxes and insurance). Refinance now at a rate of 3.66% (3.752% APR*) and your new monthly payment could be $916 — a savings of $97 a month. If the refi cost 2% of the home price or $4,000, which is typical, you’d have to be in the home 41 months to break even. If you’re not planning on staying that long, the deal isn’t worth doing. If you’re planning on staying longer, go ahead.
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