Making Your Money Work For You

Look out for Refinancing PITFALLS!

While there are different reasons refinance, such as needing access to more cash or needing to make a smaller monthly payment, the overall obvious reason would be to improve your financial position. In order to ensure that doing a refinance will actually improve your financial position, you WILL have to do your homework up front and run the numbers in advance. Thinking that refinancing will automatically help you is wrong.

In May 2015 I refinanced my house. Even though we had only had the loan for 5 years on a 30 year fixed, we had paid down the principle to the point were we only had 20 years to go. We went ahead and kept the loan term at 20 years, as we still wanted to be on the same timeline to pay it off.
To refinance from 4.5% to 3.625% literally cost me nothing (I actually gained $30 on the loan repayment), and lowering our monthly mortgage payment from $963 to $885 resulted in monthly gain of $78. This also lowered how much overall interest needed to pay the loan. However, you always want to do the Math in advance to make sure that a refinance makes sense for you.

You want to take into consideration the following:
1) Closing Costs
2) Old Term vs. New Term
3) Old Payment vs. New Payment
4) Old Total Interest Paid vs. New Total Interest Paid

The following 3 Case Studies show that while DAZZLING low interest rates might look good, that is not all you need to watch out for!
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