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By Suze Orman
A lot of you are thinking about refinancing right now, even more than buying homes. Yet, I've noticed that people are becoming concerned about the rising interest rates and are pulling back, saying they’re going to hold off on refinancing.
Before deciding not to refinance, I want you to really think about it, because the long-term savings may still be worth it. I really want you to think about if it makes sense for you to pay the costs, or if it does not.
It costs money to save money when it comes to refinancing. The costs associated with refinancing include:
So very easily, it can be between 2% to 6% of your loan amount.
Let's just look at the numbers with a $250,000 mortgage and $7,500 in closing costs. Should you roll this $7,500 into the mortgage so that it would be $257,500? Or should you pay that $7,500 up front? Which one should you do?
Most likely, very few of you have the extra money to pay the closing costs upfront, because normally you refinance because you need to reduce your monthly mortgage payment. So, you say I'm going to roll the closing costs into the mortgage.
In this particular case, if you rolled $7,500 into your refinanced mortgage, it would just cost you $32 more per month, that is all. Yet, if you pay that over a 30-year period of time, that's going to turn into $11,520. That's the real cost after that 30-year loan term.
In most cases, I would advise against rolling your closing costs into your mortgage. However, there are instances where it may make sense depending on how long you plan to stay in the home.
Refinancing your original mortgage is right for you when can check off all three of these: if:
If refinancing is what it costs you to save money, and possibly shorten the term of your mortgage, I would absolutely go ahead and do it now.
However, it does not pay to refinance your home when:
Please, do your research and ask questions, before deciding that refinancing your house is in the best interest for you and your family.
Join Suze on the Women & Money podcast (and everyone smart enough to listen) as she answers your questions and shares invaluable money lessons every Thursday and Sunday. Subscribe for free on your favorite podcast streaming app today, and don't forget to submit a rating and share the podcast with family and friends.
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Suze Orman is the author of 10 consecutive New York Times bestsellers, a two-time Emmy award winner, and your go-to for honest answers on everything finance. She is the most recognized personal finance expert in America today and host of the Women & Money (and Everyone Smart Enough to Listen) podcast. Suze is excited to be a contributor for Money Mentor.
Suze and Alliant teamed up to help Alliant members make the most of their life by teaching them to make the most of their money. New Alliant members are also eligible for The Ultimate Opportunity Savings Account.
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