Chasing the Rates, AKA, When should I refinance???

With the rates dropping once again to ‘historic lows’, people are clamoring for refinances. I have been bombarded with calls from recently closed clients asking whether or not it makes sense to refinance. We have also seen an increase of such inquiries in the Zillow Mortgage Discussion Boards, as well as the Zillow Mortgage Marketplace.

A “typical” way to determine whether or not you should consider refinancing has always been the rate alone. If you currently have a rate in the 6.5% range, it may be a great idea to give your favorite loan officer a call and see what the rates have come down to. But this is not the only consideration to make!

Usually, people look at monthly savings versus closing costs to determine if a refinance makes sense. Simply divide your closing costs by what your monthly savings will be. If closing costs are $5000, and you are only saving $75, your ‘break-even’ point is about 5.5 years away! Hardly worth the trouble, especially if you only plan on staying in the home 6 years! These are things that need to be discussed with your loan officer- preferably an honest one.

Also, take into consideration the fees and charges associated with your current interest rate. It’s hard to justify refinancing to a lower rate when you just paid two points to buy your rate down 8 months ago. You are throwing money out the window, and for what???

CHASING THE RATE.

That means you feel an emotional tie to your interest rate, and/or you love to brag to people on the street that you have the lowest rate in a two-mile radius. Do not EVER chase the rate. Your ‘favorite’ loan officer will love you, of course, but if they had any scruples at all, they would tell you to stay put! Spending dollars to save dimes doesn’t make sense. Make sure a refinance is in your best interest for today, tomorrow and 15 years from now before signing all those mortgage documents.

As always, I am available to discuss any financing questions you may have. Feel free to contact me at jmonastero@ccbloans.com

Jennifer Monastero

Citizens Community Bank