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Refinancing Opportunities

Refinancing Opportunities

Refinancing Opportunities August 6, 2010 by Lesjak Planning

Even though the U.S. economy continues its tug-of-war as it gains footing out of the most recent recession, an opportunity is presenting itself to many current homeowners. Almost two years ago the Federal Reserve began an effort to help keep home mortgage rates down to aid the struggling housing market. This sparked increased home purchases and a wave of refinancing at the time. Mortgage rates eventually climbed back up, but have recently declined back down to historically low levels. This is providing a second opportunity for current homeowners who did not take advantage of the refinancing last time around.

The following graphic illustrates exactly how low home mortgage rates currently are on a historical basis.

Graph of National Average Contract Mortgage Rate from 1963 through 2010

Consider the following example:

Original Mortgage (started 15 years ago)
$240,000 Mortgage
30 years
6.25% interest rate
$1,477/month payment

Present Balances
$172,344 Outstanding Mortgage
15 years remaining
6.25% interest rate
$1,477/month payment
Total Interest paid over the next 15 years = $93,647

$172,344 Outstanding Mortgage + $4,000 in closing costs = new loan of $176,344
15 years remaining
4.0% interest rate (current available rate)
$1,304/month payment
Total Interest paid over the next 15 years = $58,448

In this scenario, refinancing to a new 15 year mortgage saves $35,199 of interest over the next 15 years.

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Lesjak Planning

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