While interest rates continue to remain low in 2019, more people are looking at refinancing as an option. And it makes sense; if you bought a home with a 5% interest rate and could lower it to today’s rates of 4% or lower, that will save you monthly and long-term.
When you refinance a mortgage, you are essentially closing out one mortgage and opening up another. This means you go through the whole process to obtain a loan - from approval to closing. And every closing comes with closing costs.
For refinance loans, closing costs are around $4,000. If you are planning to move within the next couple of years, refinancing may actually cost you more money when you factor in the cash you pay upfront.
Refinancing with zero closing costs seems like a no brainer, doesn’t it? Just because you don’t pay for closing costs upfront, doesn’t mean you don’t pay for them at all.
When you refinance with a no closing cost loan, the lender pays those closing costs in exchange for an increase to the mortgage rate. This means you won’t get the lowest rate available today. But, you may still get a rate lower than what you are currently paying.
Because the rates are so low right now, some people are finding they can lower their current mortgage rate without paying any cash upfront. This is when refinancing becomes a no-brainer, especially if you bought your home while interest rates were significantly higher.
Dropping your rates one percent, for example from 5.5% to 4.5% can save you a significant amount of money every month. You could also decide to continue paying the same amount each month, which will allow you to pay off the mortgage faster and save you even more on interest.
With the low-interest rates we’ve seen this year, now is a good time to consider refinancing your mortgage. Talk with your mortgage broker about all of your options so you can determine if refinancing will save you money.
Contact us to start the process of refinancing!