Is it too late to Refinance?

The “Experts” Say…“Rates need to be 2% lower to justify refinancing.”

Ever hear something like this and take it at face value? In the mortgage business, we hear recitals of old rules all the time. They often come from so-called experts, but frankly, there are times when their advice could lead you down the wrong path.

The first problem with this rule: It started as a basic “rule of thumb” and was not usually properly quoted. The entire rule was: “Rates should be 2% lower if you intend to stay in your home for three years or less and 1% lower if you intend to stay in your home for three years or more.”

The second problem with this rule: It is hopelessly out of date. It goes back to a time when average loan amounts were much smaller and the fees as a percentage of the loan amount were much higher.

Follow the rules of math instead. Simply calculate whether the costs paid to refinance can be recouped through monthly savings during the time you plan to live in your home. The larger the loan amount, the more even a small difference in rate can matter.

Will you create a positive monthly cash flow each month?

For example, with a larger-than-average loan amount, reducing your interest rate by just one half of one percent could equal savings of more than $100 per month. If you spend a few thousand dollars in closing costs, the payback period will be only a few years.

The longer you have the new loan, the more the savings add up. A $1,200 per year savings could grow to tens of thousands over the life of the loan. If you apply your monthly savings to your principal, you will save even more on interest and own your home sooner.

Bottom Line: If it saves you money monthly to create cash flow to improve your financial satiation, then it is worth looking in to.  Everyone’s loan balance is different, so is there FICO score, income and the amount of money borrowed.  So there situation will be different from yours.  Instead of listening to all the experts that have had 2 or 3 mortgages, call me anytime!!

We’re happy to go over real numbers specific to your situation rather than dusty old rules of thumb. Reach out, and we’ll see what advantages might be available today.

Feel free to call me on my cell at 978.273.3227 or email me at

Providing Mortgages since 1991


Please leave a reply. Thank you! Bill

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