Can you believe what mortgage rates are these days? As of this post Bankrate shows a 30-year fixed at around 4.6% and a 15-year down to almost 4%. That’s pretty amazing when you think about what rates were just five years ago. Back then you were probably looking at rates closer to 7%. So, all this mortgage rate talk in the news has a lot of people thinking about refinancing their mortgage. I just wrote about that yesterday and made an argument that even though rates may be much lower today than your current rate it still might not be beneficial to refinance.
I know firsthand. We are stuck with two mortgages right now and it doesn’t make much sense to refinance either one. On our old house that we’re trying to sell we’re paying 6.75%. That sucks, and while a lower rate would certainly trim some money from the monthly payment, the few thousand we’d be paying up-front to do the refinance and/or the points we’d initially be paying would be a waste if the house does sell inside of a couple years before we break even. So, it’s a bit of a gamble. If it takes a long time for the house to sell, we may still come out ahead. If the house sells in the coming months we could lose out on some money.
Then we have our current house which was purchased less than a year ago. Rates were pretty good last year and we got this one for 5.25%. Even though it’s good, I’d love to be paying 70 fewer basis points to be sure. Even if we were able to get one of the lowest rates the savings would only be about $50-60/month, which stretches out the break even point pretty far. But there’s a good chance the numbers wouldn’t work out to show enough equity for a traditional refinance anyway given the wonderful Michigan real estate market.
So, I get to sit on the sidelines while people are taking advantage of these record low rates. What about you? Are these low rates getting you to think about refinancing, or have you already?
Author: Jeremy Vohwinkle
My name is Jeremy Vohwinkle, and I’ve spent a number of years working in the finance industry providing financial advice to regular investors and those participating in employer-sponsored retirement plans.