A lower interest rate often means a lower monthly payment if the terms of the refinanced mortgage are the same as the original mortgage. Depending on your credit rating, 30-year mortgage rates have been between 3.5% and 4% for several weeks. While not the lowest we’ve seen, mortgage rates are still well below the 6% level from five years ago.
For example, if you purchased a home five years ago, and your current loan payoff is $200,000 at a fixed rate of 6%, your monthly payment is around $1,288, before property taxes and insurance. If you were able to refinance that mortgage at 3.5% over 30 years, it should lower your monthly payment to $898.09. Thus, you decrease your cash outflow by more than $4,600 each year.
If you are able to refinance, you should consider applying the savings to your retirement account. Let’s do a little more math. In our previous example, refinancing at a lower rate saved you approximately $390 a month. Let’s assume you invest $390 every month for 25 years. Assuming a conservative, annualized stock market return of 8.5%, through compounded interest and diligent investing, you should have a nest egg of approximately $403,060 in 25 years. You could pay off the approximately $50,000 left on your now five-year mortgage, and have about $350,000 left in your saving account.
While this is a hypothetical scenario, the point is that by refinancing your mortgage, you can take control of how your money works for you. If you have questions regarding your mortgage, the experts at Henssler Financial will be glad to help.
If you have questions, contact the Experts at Henssler Financial: [email protected] or 770-429-9166.