Is it smart to refinance your mortgage in the first year of a new loan for a lower interest rate?

Deal Score0

My husband and I purchased our home in March of 2010 for a 30 year fixed rate of 5.75%. Our loan agent notified us that he can now refinance us at 4.75 or 5.00%. I was just wondering if it is smart to do this within the first year. Im assuming that this is the lowest rate that we will ever get, but with the economy I don’t know. Any advice would be greatly appreciated. Thanks.

  1. Reply
    January 25, 2011 at 6:11 am

    the only drawback is the finance fee…loans are not free. see finance fees in the paperwork of the home you just bought and see how much they charge per mil (per thousand).

  2. Reply
    January 25, 2011 at 6:24 am

    Sure your loan agent notified you. You pay all closing costs again and the agent earns a fee. You gain nothing by that deal.

  3. Reply
    Freddy Fuhktarred
    January 25, 2011 at 6:46 am

    the market rate for a 30 yr fixed right now is 4.25..4.75 is kinda high..

  4. Reply
    January 25, 2011 at 7:38 am

    This seems to be a question everyone is starting to ask themselves. Although refinancing a mortgage could save you money in the long run, it’s important to ask the question “How long will it take before I start to save money?” To figure this out, start with the amount you will save by lowering your monthly payment. Then add up all the costs associated with refinancing and divide the total by your monthly savings. This will reveal the number of months it will take to reach the break-even point.

    To give you an example, let’s assume that refinancing would lower your payment from $ 1,000/month to $ 800 month (saving you $ 200 per month.) Your prepayment penalty, closing costs and points add up to $ 2600. Divide $ 2600 by $ 200 and this tells you that it will take 13 months to realize the savings.

    Keep in mind that your break-even point depends on other factors as well, including your tax situation and whether you pay closing costs up front or roll them back into the principal of the new mortgage.

    It’s important to shop around before you decide to refinance since the rates that lenders offer can vary by almost 1%. It’s also wise to make important calculations based on the information of your new loan to support your refinancing decision. Since your loan agent has already told you he can refinance you at 4.75 or 5%, it may be a good idea to ask for a customized, detailed quote. That way you can make those calculations and see if refinancing would be financially beneficial to you.

    For free, helpful mortgage calculators, you can visit:

    Leave a reply

    Register New Account
    Reset Password