Is Refinancing Right for You? 3 Questions to Consider Before Refinancing


With the recent drop in rates we have seen an influx of refinance transaction. How do you know if refinancing is right for you? Here are the 3 main things to consider when thinking about refinancing.

Will you save money?

This seems like a simple answer but it’s the truth. If you can save money on a monthly basis by lowering your mortgage payment you could put those extra funds toward paying down debt, saving for a big purchase, increase your retirement funds, or pay down the principal faster on the mortgage.

Will the money you save outweigh or break even with the cost of the transaction in a fairly short amount of time?

Yes saving money is great, but will the closing costs charged by the bank make it tough for this transaction to pay for itself? For example, if you are saving $100 month on the refinance but it will cost you $2500 at closing then the break-even point is 25 months or about 2 years. For some people, that break-even point is worth it. For others it may not be.

How long do you plan on being in the house?

Many are enticed by the low rates of a 15 year mortgage but don’t understand that when going from a 30 year mortgage to a 15 year, the payments will increase due the shorter repayment term. If paying off the loan as quickly as possibly is what you are interested in then, yes, a 15 year loan can help. However, if you don’t plan on being in the house very long then refinancing back to a 30 year term could help increase your cash flow in the meantime.

Every situation is different but these are the 3 main things to look at when deciding if refinancing is right for you. The media always says not to refinance unless you can save 1% on your rate—for most that isn’t possible, but even a lowering of .25% can increase the George Washington’s in your bank account.

If you are thinking of refinancing and have more questions, please contact me at zach.williams@yourstatebank.com or 740-398-4917 (call/text).

I look forward to hearing from you.

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