Sudden savings alert! Mortgage rates are dropping again. How much could you save if you refinanced at a lower rate?
At the moment, a 30-year fixed rate loan is about 4.75%; a 15-year fixed is about 4.02%, according to Bankrate.com.
Pay less, save more
A refi only makes sense if the numbers work. For example, if you wanted to refinance your current 30-year fixed mortgage of $175,000, which is at 5.75%, down to 4.75%, you could save $162.00 per month now—and about $22,600 in interest over the life of the loan.
But, there are costs associated with a refi, as we describe here. In our current example, assuming the refinance costs are about $2,000, it would take about a year to recoup those fees.
Use this calculator to run your own numbers. (MP and Amanda are considering refis right now. MP wants to swap her 30-year for a 15-year. She'd pay about $120 more per month, but save $121,000 in interest!)
It ain't saving until you save it
But wait. There's one more key step. Whenever you kill a bill, cancel a sub or drop a charge—it ain't savings until it's in the bank.
So save your savings, as we describe in our recent post for Ramit Sethi's "I Will Teach You to Be Rich" blog.