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  • Writer's picture Treavor Dodsworth CFP®, CPA, CKA®

#46 - Mortgage Refinance

Mortgage Refinance

With mortgage interest rates at or near record lows, mortgage refinancing is receiving a particular amount of attention...  and for good reason. I did a refinance analysis this week where the individual would save about $80,000 if they ended up keeping the loan for the full term.

There are several reasons people are hesitant to refinance their mortgage. I highlighted a couple of the reasons below.

People often hesitate to refinance if they are planning to sell their home in a short period of time. There are typically costs associated with refinancing and therefore if the savings won’t overcome the costs before you sell the home it may not make sense to refinance.

To potentially overcome this, you could ask the lender if they will add credits to offset the loan cost. If the lender adds credits, they will likely raise your interest rate but it may shorten the breakeven time. Also, don’t forget plans change. Even if it would only save you a small amount now, you may end up staying in the home longer than expected. Be sure to balance the upfront cost vs. the interest rate.

Another reason people hesitate is they don’t want to extend their loan term. If you are already several years into paying down your mortgage, making the minimum payments on your new mortgage could extend out your payoff date. In my opinion, this hesitation is typically incorrect. 

When you refinance, your payment will likely go down. If instead of making the minimum payment on your new mortgage, you continue paying your higher old payment it will typically make the payoff time sooner than even your original loan. After refinancing you can make the determination if you want to pay the extra amount down on your loan or use it in another positive capacity.

There are several nuances with refinancing and everyone's situation is different. It may or may not make sense depending on your individual circumstances. On a limited basis, I would be happy to do free mortgage refinance analyses. Let me know if you are interested or feel free to forward this on to someone you think may be interested.


Interesting Article(s) or Video(s)

  • “The IRS has extended the rollover deadline for required minimum distributions (RMDs) taken from IRAs or company plans in 2020.”

  • While mortgage rates have fallen, credit card interest rates have not.


Thank you for reading! Have you reviewed if refinancing your mortgage would make sense for you?


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