When I should refinance?
It is often said that you should refinance when mortgage rates are 2% lower
than the rate you currently have on your loan. Refinancing may be a viable option
even if the interest rate difference is less than 2%. A modest reduction in
the loan rate can still trim your monthly payment. For example, the monthly
payment (excluding taxes & insurance) would be about $770 on a $100,000
loan at 8.5%. If the rate were lowered to 7.5%, the monthly payment would be
about $700, a savings of $70. The significance of such savings in any scenario
will depend on your income, budget, loan amount and the change in interest rate.
Your trusted lender can help calculate the different scenarios.