Rates Are Low, Should I Refinance?

Like all great answers... this is part art and part science.

Art: How Long Will I Own* The Property?

Not always the easiest to answer, though it is critical to measuring the potential return on your investment in a refinance (yes, even those 'no cost, no fee' loans cost you money - though often these costs are buried in the new rate).

Science: When Will I Make A Profit?

Once we set a baseline on time, we simply need to compare the monthly savings between your current and potential new mortgage payments with the costs of refinance** to determine how many months it takes to become profitable.

For instance, if your new mortgage will save you $200/mo and your costs of refinance are $6,000, then we know it will take you 30 months to breakeven on your refinance. If you plan to keep the property for more than 2.5 years, then a refinance will be profitable.

Important Details

*Own - notice we didn't say 'live in' the property. Even if you plan to move up/down or around the neighborhood, if your retain your property as a rental investment a low rate mortgage can be an amazing tool to build wealth.

** Costs of Refinance - it's important to focus on actual costs of refinancing, not all the costs included in an estimate. Taxes, insurance and/or homeowner's dues which may be collected as part of closing a refinance are 'pass through' costs and would be paid either way. We want to look a origination fees, appraisal, underwriting, title/escrow and other fees related to creating and closing the loan which would not otherwise be experienced without the refinance.