With long-term interest rates dipping below 4 percent last week, many homeowners are likely thinking about refinancing their home mortgages.
So, how do you know when to pull the trigger? Some believe that a good measuring stick is to wait until mortgage rates have dropped 1 percent below the rate you locked in when you bought your home; others urge owners to balance the cost of refinancing with how much they will save every month at the new rate.
Another factor that plays into whether or not you should refinance is how long you plan to live in the home. If a borrower divides the costs associated with refinancing by the amount they will save on their mortgage every month, the calculated figure will be the number of months that it takes to break even. If you plan on being in your house longer than that, refinancing might make sense.
With the latter point in mind, we set up a refinancing scenario based on a $500,000 home purchase. For our purposes, the home was purchased with a 20 percent down payment back in August 2013 when rates stood at 4.58 percent. The refinancing would be done at last week’s rate of 3.97 percent and cost the borrower $6,000.
Using Zillow’s Refinance Calculator here is how things would look:
In short, the savings would amount to $196 a month and the borrower would break even on the refinancing costs after 31 months. So, it really would only make sense to pony up the $6,000 in refinancing fees if you plan to stay in your house for at least three years.
To try out your own refinancing scenario, click here.
See other articles related to: refinancing
This article originally published at http://dc.urbanturf.com/articles/blog/a_500000_refinance_scenario/9120
Most Popular... This Week • Last 30 Days • Ever
UrbanTurf has compiled virtual looks at large new developments around the DC region.... read »
The project would replace a concrete plant and would deliver the neighborhood's first... read »
Loan recasting is a growing practice- so what is it?... read »
The 25-acre array will produce a quarter of the university's current annual energy co... read »
This year will likely go down as the year that prices for houses in DC reached new he... read »
The preferred mortgage product among most home buyers is the fixed-rate mortgage. How... read »
STAY DC provides rental aid and utility payment grants to at-risk District residents ... read »
The planned 8-unit development would be located on K Street right along the Potomac R... read »
Landmark Theatres is in the final stages of negotiations that would have it operating... read »
The 12,000 square foot replica of 1600 Pennsylvania Avenue went under contract last w... read »
With this weekend's DC houseboat tour a day away, UrbanTurf thought it only fitting t... read »
President Obama travels to Denver this morning to sign the stimulus bill that has bee... read »
In this week's installment of Ask An Agent, a reader wonders if there is a rule for h... read »
As The Wharf prepares to begin construction, DC's houseboat community heads to its ne... read »
In this week's installment of Ask An Agent, a reader asks a fairly common question th... read »
DC Real Estate Guides
Short guides to navigating the DC-area real estate market
We've collected all our helpful guides for buying, selling and renting in and around Washington, DC in one place. Visit guides.urbanturf.com or start browsing below!
Intro guides for first-time home buyers
Awesome and unusual real estate from across the DC Metro