FEATURE ARTICLE: What Are Some Smart Ways to Refinance?
Recently, fixed mortgages were near their lowest rates in almost 30 years. And if you are one of the many people who took out mortgages in the few years prior to that, you may be wondering if you should look into refinancing.
If your mortgage was taken out within the past five years, it may be worthwhile to refinance if you can get financing that is at least one to two points lower than your current interest rate. You should plan on staying in the house long enough to pay off the loan transaction charges (points, title insurance, attorney’s fees, etc.).
A fixed-rate mortgage could be your best bet in a rising interest rate environment, if you plan to stay in the house for several years. An adjustable mortgage may suit you if you will be moving within a few years, but you need to ensure that you will be able to handle increasingly higher payments should interest rates rise.
One way to use mortgage refinancing to your advantage is to take out a new mortgage for the same duration as your old mortgage. The lower interest rate will result in lower monthly payments.
For example, if you took out a $150,000 30-year fixed-rate mortgage at 7.5 percent (including transaction charges), your monthly payment is now $1,049. Refinance at 6 percent with a 30-year fixed-rate mortgage of $150,000 (including transaction fees), and your payment will be $899 per month. That’s a savings of $150 per month, which you can then use to invest, add to your retirement fund, or do with it whatever you please.
Another option is to exchange your old mortgage for a shorter-term loan. Your 30-year fixed-rate payment on a $150,000 loan was $1,049 per month. If you refinance with a 15-year fixed mortgage for $150,000 — including transaction costs — at 6 percent, your monthly payment will be $1,266. This payment is only $217 more than your previous mortgage, but your home will be fully paid for several years sooner, for a savings of more than $150,000! And some banks around the country are beginning to offer 10- and 20-year mortgages.
Either way you look at it, it’s an attractive idea.
If you’re considering refinancing your mortgage, consult your financial advisor and determine whether refinancing your home would be a good move for you.
MONEY SAVING TIP: Translate dollars spent into hours worked to earn those dollars spent.
Money in itself means nothing. It’s little green pieces of paper. It is what money stands for that means something. When you go to work, you are trading the power to control what you do with the hours of your days to an employer in exchange for those little green pieces of paper. To save well, you need to keep in mind what it is that is at stake when you spend some of those little green pieces of paper. The real cost of buying stuff is losing power over what you do with your time.
If you earn $25 per hour, a $50 expense is really the loss of control over two hours of time. Money can’t buy you love in a direct sense, but not spending money can buy you back control of your time, and you can then use your time to do things you love.
DID YOU KNOW…how to tell when BOGO and 2-fer deals are good?
BOGOs (buy one, get one), two-fers (two for the price of one) and bundled-item promotions successfully tempt you into shopping more often and spending more to raise the store’s number of sales as well as ticket averages, or amount of each sale. They’re not always a good deal for you if you’re not familiar with the store merchandise and its regular prices. “You’re not saving if you are actually spending more than you planned,” says Underhill.
Resist the urge: “Know your favorite retailers, brands, regular prices, promotions and discounts — and always check the clearance area first to find a similar item on sale to avoid buying two of anything and spending more,” says family financial expert Ellie Kay, author of “The 60-Minute Money Workout.“
“Ask yourself, ‘Do I really need two sweaters or two of the same jeans?'”