Should You Refinance? Ask Our Checklist!
Rates are the lowest they have been in years! If you are thinking about refinancing, Your Favorite Real Estate Team is here for you to help find out if now is the right time for you to refinance. We are the best real estate team at the Lake of the Ozarks, so we are familiar with the market and how to to analyze this kind of decision. Keep reading to learn more and evaluate your readiness to refinance.
In past years, the advice was that you should only refinance if it would save you 1-2 percentage points; however, that has changed in more recent years. As rates become lower overall, percentage points can make a bigger difference with smaller adjustments. Therefore, the current recommendation is that your new interest rate should be at least 0.5 percentage points lower than the current interest rate on your mortgage. So if your current interest rate is 5.0%, then a new rate of 4.5% could be worth taking the leap.
Closing costs are an unfortunate part of every home purchase or refinance. If you're paying closing costs that are too high, the new lower interest rate may not be worth it in the long run. To determine how long it will take for your new loan to pay for itself, take the costs of closing by the the amount you will save each month. That will give you the length of time it will take. It is recommended that this number be no more than five years in order to make the refinance worth it.
If you were able to answer these questions and stick to the recommended criteria in your calculation, then refinancing could be right for you! Be sure to talk with a mortgage broker and your financial advisor before making the leap. You may even save enough to shorten your timeline on buying a new lake house! To work with the best real estate team at the Lake of the Ozarks, call Your Favorite Real Estate Team. 573-240-9052
How Much Will the Rate Change?
In past years, the advice was that you should only refinance if it would save you 1-2 percentage points; however, that has changed in more recent years. As rates become lower overall, percentage points can make a bigger difference with smaller adjustments. Therefore, the current recommendation is that your new interest rate should be at least 0.5 percentage points lower than the current interest rate on your mortgage. So if your current interest rate is 5.0%, then a new rate of 4.5% could be worth taking the leap.
What Will be the Length of Recovery?
Closing costs are an unfortunate part of every home purchase or refinance. If you're paying closing costs that are too high, the new lower interest rate may not be worth it in the long run. To determine how long it will take for your new loan to pay for itself, take the costs of closing by the the amount you will save each month. That will give you the length of time it will take. It is recommended that this number be no more than five years in order to make the refinance worth it.
How Many Years Will it Add?
It's important to consider how much time a refinance will add to the complete length of your mortgage loan. If it is going to add another ten years to the amount of time you're paying off your house, then it is likely not worth it. Not only will you be paying for a much longer amount of time, but you will also end up paying significantly more overall. A good number to use as a guideline is five years. It is best to add just five years or less to the length of your loan. For example, if you started with a 30 year mortgage seven years ago, then it's probably best to not refinance with another 30 year mortgage. That would mean adding 7 years to the overall length of your loan. Try sticking to 5 years or less. If you can take time off your loan, that would be even better!
Lake of the Ozarks Refinance
If you were able to answer these questions and stick to the recommended criteria in your calculation, then refinancing could be right for you! Be sure to talk with a mortgage broker and your financial advisor before making the leap. You may even save enough to shorten your timeline on buying a new lake house! To work with the best real estate team at the Lake of the Ozarks, call Your Favorite Real Estate Team. 573-240-9052
CONTACT ED SCHMIDT FOR ALL YOUR LAKE OF THE OZARK REAL ESTATE NEEDS
Ed Schmidt, REALTOR
752 Bagnell Dam Blvd. Suite A
Lake Ozarks, Mo 65049
Phone: 573-240-9052
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