[email protected] | Finance: Refinancing

Sheri, check out our
competitive mortgage rates. My goodness. Rates just keep going down. I wonder if I should refinance. You know, this decision,
like almost every decision in finance, is all
about trade-off. Trade-off? Sure. In this particular
case, the trade-offs are between the
costs of refinancing and the value of the
savings if you do refinance. So if the cost of
the refinancing is greater than the value of
the savings in refinancing, you’d probably want to stay put
in the mortgage that you have. But if the costs are less
than the value of the savings, then I think you might want
to think about a new mortgage. Does that make sense? It does, but how do
you figure the cost and the value the savings? Sure. A bank like this should
be able to give you a pretty accurate idea of the
closing costs of a mortgage. For example, the
application fee, maybe the cost of a new
appraisal, the loan origination fee to the
lender and so forth. And there might be other fees
associated with a new mortgage. But you should have
a really good idea about what those costs are
before you make a decision. And next would be the
value of the savings. The reason that you’re
asking this question is because interest
rates have gone down. And for a mortgage
loan, that translates into lower monthly
payments down the road. And so what you’d want to do is
calculate those lower payments. And then subtract them
from the higher payments that you now have with
your current mortgage. And what you end
up with is a stream of savings that last for as
long as you stay in the house, or the life of the mortgage,
whichever is shorter. And then you just translate
that stream of savings into a value today and
compare it to the cost, and then make your decision. Thanks. Have you made your
decision yet, Sheri?

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