[sos07]

Hi, I've lived in a townhouse for 6 years and our current mortgage interest rate is 4.12% in CA. My real estate agent called to say the mortgage 30-yr fixed interest rate is 3.27% He said if we refinance for 24 yrs, we would save about $40 each month, and $40,00 over the next 3 yrs.

Since we re-financed 2 yrs ago, is it a good idea to re-fiance and go through the hassle of doing all the loan paperwork again?

Thank You so much

[hkstroud]

Suggest that you compute the .87% interest rate reduction times the principle owed to determine the annual interest reduction. Compare that number to the cost of refinancing (loan origination and other fees charged by the bank) to see how long it will take you to break even.
Then use the actual annual interest reduction times your federal and state income tax rate to compute your increase in taxes. Since home mortgage interest is a deduction reducing the interest paid is just like getting a raise. That number will be your actual annual savings.

Then consider how long you are likely to live in this home. Chances of living in the same home for 24 years is very small for most people.

It is unlikely that a .87% interest rate reduction will be profitable to you, but it will be for the real estate agent.


You said,

He said if we refinance for 24 yrs, we would save about $40 each month, and $40,00 over the next 3 yrs.

I believe you meant $4,000 over the next 3 years. $40 a month is $480 per year and $1440 over 3 years. Got to work those numbers yourself.