Have you ever heard the phrase “tripping over dollars, picking up pennies”? In essence, this phrase refers to missing expensive details because you focused on something else. That is what can happen when you only look at the interest rate when doing a mortgage refinance. It can be easy to fall for a small reduction in the interest rate without realizing how little you could gain while giving up far more.
The first thing to do is look at what you would save. For example, let’s take a 30-year $250,000 mortgage and look at the difference between 2.9% and 2.5%. At 2.9%, your monthly payment would be $1,041. At 2.5%, it would be $988. Your savings is $53 per month. If you were to hold the loan over the entire 30 years, you save $19,080. It would be best if you gauged that savings against what it will cost to complete the mortgage refinance, including application fees, title search, appraisal, and other expenses. You should also consider that, if circumstances change and you want to pay off the mortgage early, the prepayment penalty could quickly eliminate what you saved and more.
The moral of this story is to be sure you understand all facets of a mortgage refinance before you proceed. Not only do you need to do the math, but make sure you also consider what could change in the future. At Donna Mullen & Associates, we help you examine what you can gain and give up during a mortgage refinance. We can also assist you with moving forward the right way with mortgage products without adverse fine print. Reach out today to learn more.