Whether or not you should refinance your home mortgage depends upon several factors, including whether you are looking to simply reduce your monthly payment or whether you are hoping to save money in the long run.
To understand better, let’s look at an example. It your original 30-year loan was for $250,000 at five percent interest, and you have already paid on it for 60 months, you can reduce your monthly payment if you refinance for a new 30-years period with a 4.5 percent interest rate.
The bottom line is:
- total monthly payment savings will be $10,652.08
- your remaining balance will be $5,947.99 bigger because you will pay less toward your mortgage principal (bigger principal is worse)
- quitting previous loan and opening a new one will cost you money
Summing up these numbers, we can figure out your total refinancing benefit, which will be $4,704.09.
DISCLAIMER: There is NO WARRANTY, expressed or implied, for the accuracy of this information or it’s applicability to your financial situation. Please consult your own financial advisor.