One simple action can save home buyers thousands of dollars on their monthly mortgages. Millions of consumers are considering refinancing their homes, because they discovered how quick and easy it is!
Why not? Debunking the Scary Scam!
Homeowners are scared stiff of refinancing for two reasons:
- They assume it’s a scam.
- They assume it involves a lot of paperwork and time.
Both assumptions are not true! Refinancing is an opportunity. American inventor Thomas Edison famously said: “Opportunity is missed by most people because it is dressed in overalls and looks like work.” In actuality, it’s not work at all; it is as simple as a Google search.
Buyers who have never refinanced think the money they owe cannot just disappear. And they’re right; it doesn’t. What happens is that you take out a new loan and use it to pay off the old one.
In most cases, the new loan has benefits the old one didn’t, like:
- Lower interest rates
- Lower monthly payments
- Faster repayment
- Bi-weekly plans
- Cash back
WARNING: Your credit score, or changes in the economy and the market can make these new loans available. It can also take them away. So timing is everything, and right now happens to be a great time for refinancing!
The Single, Non-Scary “Catch”
The only catch is this: refinancing is only worth it if you save more than you would spend in closing costs from the original loan.
Let’s say you’re paying $800 per month on a $100,000 loan with 7% interest, and you have 20 years remaining on it, and $5,000 in closing costs. If you refinance that for a 6% interest rate instead, your monthly payment drops to $716.43 per month. And the best part: it’s still a 20-year loan. After paying the $5,000 closing costs, you save $1,002.84 per year, from just a 1% difference. You need to stay in your home for about 5 years before the savings offset the closing costs, but that leaves 15 years of potential earnings.
The total savings for this example would be around $15,000.
Could You Use an Extra $15,000?
What could you do with that much spare money? A lot! More than you might know what to do with. And those interest numbers in the example are a high estimate. Today, you can get loans with as low as anywhere between 3.75 to 4.5 APR. At such low interest rates, a 1% difference will save you even more!
After the housing bust of 2008, new lending policies and practices took effect. These make refinancing easier than ever. But prices are rising, and showing no signs of slowing down. So the sooner you refinance, the cheaper it will be in the long run. What are you waiting for? Discover how much you can save today!