Today as part of our partnership with Trusted Lending Advisors, we’re looking at how long you have to live in your home in order for refinancing to make sense:
Question: We’re thinking about refinancing but aren’t sure if we should or not since we don’t plan to stay in our home forever. How long should we plan to live in our current home in order for refinancing to make sense?
Answer: Every situation is different. Our “rule of thumb” is that if a client can drop 1% on their interest rate and/or save $100 per month on their new mortgage payment, this will make a refinance worthwhile. This normally keeps the client in a 1-3 year break-even period on refinancing, which is calculated by dividing closing costs by monthly loan savings in most cases.
In the case of converting from a 30-year loan to a shorter-term (20, 15, or 10 year loan), we calculate the total interest savings of the lower rate/shorter term loan and then provide that break-even analysis to our client. So, in most cases if a client plans to spend at least 2 more years in their home a refinance should be worth considering.
If you’d like to run the numbers to see if refinancing is a smart move for you, call Tim and Dave at Trusted Lending Advisors: (719) 266-8183 or visit their website to contact them via email. Don’t forget that if you mention Springs Bargains, they will pay for your appraisal (up to $400 value) on any closed loan transaction!
Make sure to read our other posts related to home loans and refinancing:
- Just how much can you save by refinancing?
- Information about the different types of loans: FHA, VA, and Conventional
- Home buyer alert: home buying costs going up for FHA buyers
- What to expect when you apply for a home loan or refinance
- Why we’re working with Trusted Lending Advisors
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