Question by stubby: how much should the interest rate on my mortgage drop before refinancing?
Answer by shama m
Even one percent makes a difference! 2 is good- 3 percent is rare, but if you started out at, say, 7-1/2% – I would refinance immediately to todays rates!!!
Know better? Leave your own answer in the comments!
It depends on your current rate. If you can save a couple of points then do it.
if you can recoop your closing costs within 2-3 years and its a fixed rate you can use that as a rule of thumb this is what I normally advise clients
When it makes sense to YOU.
Your goals are not my goals, nor anyone else’s.
If $ 50 savings on the mortgage is the difference between whether you eat or not, save the house from foreclosure, or just simply add another pack of cigarettes to your budget, only you can decide the importance and worth in refinancing.
I agree with the last statement. It depends on you. For example if your rate is 6.5% right now, and I refinance you at the exact same rate, no rate reduction at all but I give you $ 50,000 to pay off, a car, three credit cards, and a boat loan. Then that benefits you greatly and your rate never lowered. Depends on you.
My normal rule of thumb is…if you can recoup the closing costs within 24 to 36 months, then it is definitely worth while to refinance. In this market, you need to take advantage of every opportunity to put yourself into a better mortgage. Even if you are only cutting your rate by 1/2 of a percent, you still have a better mortgage than what you had before.