Three reasons to refinance now

Three reasons to refinance now

Three reasons to refinance now

It’s no secret that mortgage interest rates are at historic lows. Freddie Mac reported on June 3 that the average conventional 30-year and 15-year mortgage rates were fixed at 2.99 percent and 2.27 percent, respectively.

One year ago, the rates were 3.61 percent and 3.18 percent, respectively. As a result of this enticing news, refinancing is on the minds of many Las Cruces homeowners. The decision of whether to take the plunge is a highly personal matter, however, and is specific to each borrower’s situation. 

Since there is no such thing as a “one size fits all” reason why one may desire to refinance, the first order of business is to identify the purpose of the refi.

MOTIVATION: Typically, there are three reasons people choose to refinance their loans:  Reduce their monthly payment, reduce the term of their loan, or generate cash for planned or emergency expenses such as health issues, financing college costs, adding to or remodeling a home or paying off high-cost debt.

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COST: One of the main considerations is how much the refinance will cost and how long it will take to recoup the investment. Let’s say a person currently has a mortgage of $185,000 at an interest rate of 4.375 percent. If he were to refinance today at 2.99 percent, he would reduce his interest cost by about 1.34 percent, or $2,479 annually. If the price tag to do the deal is, say, $4,000, he would recoup his investment in about 18-months. If he remains in the property or keeps his new loan for at least that length of time, he wins. If he leaves or refinances prior to that time, the switch may not be worth the cost.

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