Although rates have moved up some from their lows, it is still a great time to refinance your current loan or even consider consolidating some debt. Not every home in America is under water, meaning valued less than what you paid years ago. There are many homes that still have equity yet may have a higher interest rate. If you currently have an interest rate above 5.75% on a 30 year loan you may want to consider refinancing because rates today are hovering around 4.7%-4.80%. However, you may want to look into keeping the payment the same by refinancing to a 20 year term. For example, imagine you took out a loan for $200,000 6 years ago for 6%, 30 year loan, your Principal and Interest payment would have been $1,199.10 per month. Today, you owe 24 more years on the present loan remaining of $179,243.76. If you refinanced at 4.80% with closing costs of 2.5% or $4,481.09, you would need to take out a new loan for $183,724.85.

Let’s assume a few financing scenarios:

1. 30 year fixed rate at 4.80% on $183,724.85 would equal a payment of $963.94. This would result in a $235.06 monthly savings from your previous mortgage. However, you need to take into account the closing costs of $4,481.09 to determine your break even point of making the change. It would take you 19.06 months to recover your cost of refinancing. You would save $68,382.57 in interest payments even though you paid closing costs and added 6 more years to your payoff date.
2. Using the same assumptions above, now change the term to 15 years and the interest rate to 4.14% your payment would increase to $1,371.72 per month. You would pay off your mortgage in the half the time by increasing your monthly payment by $172.82. You would save $100,073.71 in interest using a 15 year mortgage versus a 30 year mortgage. 
3. Assume you could not afford to increase your monthly payment and instead opted for a 20 year loan at 4.80% on a loan of $183,724.85. Your payment would be $1,192.30 per month or a savings of $6.80 per month. However, you would save $60,867.54 in interest versus the 30 year mortgage.

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There are a number of options that Legacy Financial Advisors can help you look into based on your situation. We can even put you in contact with one of a number of independent mortgage brokers we have worked with over the years to help you find the best option. Please contact us if you have questions about what might be best for you or if you have a family member or friend that could use some help evaluating what may be best for them. Give us a call now while rates are low.

Call today to learn what options are available to you! (952) 893-5555