Making the decision to refinance, is it right for you?

With interest rates rising above historical lows, I'm getting this question very often, "does it still make sense to refinance?" Helping consumers determine if it makes sense to refinance is what I do. It's a pretty individualized process and depends on things like: how long you plan to stay in your home, what your current interest rate is, how much is your home now worth? Navigating the questions and finding the answers with you is what I do.

When you purchased your home, in all likelihood, some of your costs were covered by the seller. When you refinance your home, all of the costs are covered by you. So in a nutshell, you want to make sure that the cost of refinancing your home will produce a benefit. Even a so-called "no cost" loan has costs, the cost to you the borrower, is typically a higher interest rate. The easiest way to determine if there's a benefit to you is to divide the costs of the loan by the monthly savings to determine the length of time it will take to payback your costs in your savings. So if your "payback timeframe" is 36 months and you want to stay in your home until Johnny graduates from high school in 5 years, this would make sense for you. But if your "payback timeframe" is 36 months and you're pregnant and think you might outgrow your house soon, maybe not.

Another way to look at whether the benefit of a refinance is greater than the cost is to compare an amortization schedule of your current loan and remaining time frame, balance and interest rate to an amortization schedule of the proposed loan. There are a bunch of different tools out there. Here's a link to one that I've used before.

In any case, I would love to help you navigate the decision making process.

The chart below, brought to you by the Legacy Lending Group, debunks the truths and myths about refinancing: