The US national average for a 30 year fixed-rate mortgage is currently around 3.92%. How does this rate compare to your rate?
Here’s an easy calculator you can use to estimate your new payment: Bankrate.com
The rule on the efficacy of re-financing is typically quoted as: “a 1% reduction in rate”.
My rule is: “a reduction in total annual payments equal to at least one month’s payment under the current loan”.
- Current loan of $200,000 at 4.875%, monthly payment of $1,058 (annually = $12,696)
- New loan of $200,000 at 3.92%, monthly payment of $946 (annually = $11,348)
- Monthly savings: $112
- Annual savings: $1,344
Caveats: rates offered are highly dependent on your credit score, employment, household income and household debt ratio among other factors. Pay attention to “points” (pre-paid interest) and closing costs. Your best place to start is with your current lender – they may have an “EZ Re-Fi” program designed to keep your business on their books. Many lenders are offering “paperwork only” re-fi’s just for this purpose.