Q&A - Refinancing a mortgage

Question: Hey Justin, what are your thoughts about refinancing a home mortgage that we got recently?

Answer: This is a good and timely question. As I write this on July 14 2019, surveys of major lenders show an average 30-year fixed rate of 3.97%1. A year ago it was 4.7%1. This presents an opportunity to save money, but we must think it through. Just because you can get a lower interest rate doesn’t mean you should refinance. The main finance related factors to consider are:

1) How long you plan to keep the house

2) With #1’s answer in mind, how much in interest will you pay on your current mortgage over that time compared to what you would pay if you refinanced to a lower rate

3) How much will it cost you to refinance now (appraisal fees, mortgage origination costs, the cost of your time and effort, etc.)

A word of caution. I’ve heard many people over the years tell me refinancing was a good deal for them because it lowered their payment. However, comparing monthly payments is not apples to apples. If you are 5 years into a 30-year mortgage and you refinance to a new 30-year mortgage, one mortgage will extend your payments another five years, so of course those payments may appear to be lower. The question is not how much the monthly payment will change but how much you will save in interest over the period you expect to own the house.

It’s also worth noting that people currently carrying adjustable rate mortgages should likely be even more motivated to refinance to a fixed mortgage now if they plan to stay in the house well past the point of the variable rate kicking in.




^{1: Current Mortgage Rates, bankrate.com, Deborah Kearns, 7/10/19
Financial Advisors do not provide specific tax, legal, or mortgage advice and this information should not be considered as such. You should always consult your tax or legal or mortgage advisor regarding your own specific situation}

^{Justin is a registered representative and investment advisor representative of CRI Securities, LLC and Securian Financial Services, Inc. 
2645051 / DOFU 7-2019}