“Nearly 5 Million Mortgages Paying Higher than necessary Interest Rates”
According to the latest report from Black Knight, 4.9 million homeowners with a mortgage can now reduce their interest rate by at least 0.75% by refinancing after the recent drop in mortgage rates.
Should they all refinance? NO. Here’s the thing, you must look at the math. Just because some can save 0.75%, will the cost justify the refinance?
I received a call from Becky who was referred by a co-worker. She had been in her mortgage for 8 years and had 22 years remaining. She had a mortgage rate that was about 1% higher than was currently available for a 30-year mortgage.
When I reviewed all her numbers there was a better solution. We ended up refinancing into a 15-year mortgage and included a car loan and 2 credit cards. Her current mortgage payment was $1411, her car payment was $649 and the minimum payment on the credit cards was $316, all of which totaled $2376.
Her new mortgage payment was $1450, plus $699 for her escrows for a total of $2149.
So, looking at the math she has a monthly savings of $227. Plus, two more important benefits. Interest on her credit cards and auto loan were not tax deductible yet all the interest on the mortgage is deductible. Now the BIG benefit is that Becky will save $67,000 in interest by reducing her mortgage term by 7 years.