With interest rates below 4%, many homeowners may be asking the question, should I refinance my mortgage? The answer may be easy, and it could be complicated.
Should I Refinance My Mortgage?
With rates around 3.75%, it may make sense to refinance anything over 4.5%, depending on how long you want to stay in your current home. In the old days, experts used to tell people you’d better save 2% or more on rates because the refinance costs were so high. Keep in mind you will be asked to pay for a new title policy for the new lender, appraisal in most cases, and other closing costs. It’s not free to refinance, so you’d better save money by doing it.
If rates today are 3.75% and you take out a new 30-year loan on $250,000, the principal and interest portion would be $1,157.19. If you had a loan at 4.5% on $250,000 the P&I payment would be $1,266.71 So the savings would be $109.52/mo or $1,314,24/yr. Closing costs might be $4,000-$5,000, so that could take 3,8 years just to break even on the deal.
Does Your Home Suit Your Needs?
The other question you must ask yourself is, does this home suit my needs? If so, for how long? Is my family growing or shrinking? Might my job take me somewhere else? How is my health? Will the property be too much to take care of 5 years from now?
If your situation could change in the next 5 years, it probably wouldn’t make sense to refinance. It might make sense to make the move now while rates are low. If you wait 5 years to make the move, rates could go up a few percent. Each percentage point rate gain costs a buyer 11% purchasing power, so essentially you could qualify for 22% less home. Or, it could cost you a lot more in payment per month.
If you’re 1-2 years away from making a move, is there a way you could make that move while rates are this low? It’d be a shame to spend all that money refinancing for a home that won’t suit you in a few years and miss the low rates on the next home.
If You Did Move, Where Would You Go?
Many people in SW Florida are contemplating this very decision right now. What makes it complicated is they’re not sure where they’d move to, and how they would pull it off. That’s where a real estate consultant comes in. A consultant isn’t there to sell you anything. They’re there to present you with your options, and let you choose what’s best for you.
The Ellis Team at Keller Williams Realty are consultants. We want you to make the best decision for you. We know about inventory you might not know about, like homes hidden from MLS or new construction. It may make sense for you to make a move now, and it might not. Until you know the cost of where you’re going, and how much you’d net if you sold your home, it’s impossible to make a fair decision.
You can’t base your current home’s value off those online valuation models. They can be wrong, and they don’t figure in how much you’ll net in the end. We can help you with that. Making a good decision is like putting a puzzle together. You must identify all the pieces, turn them right side up, and put them in their correct position. Only then does the picture become clear, and your decision gains clarity.
Call Sande Ellis or Brett Ellis 239-489-4042 Ext 4. We’ll help you get a fair value of your current home, make some suggestions on where you could go based on your needs, and figure up what it will cost to do it. You’ll have the best advice, and you might just make that move you’ve been talking about. Or, you might decide you love your current home and it’s the place for you.
We look forward to speaking with you. Good luck and Happy House Hunting! And remember, always call the Ellis Team at Keller Williams Realty.