If Your Mortgage Rate is Over 3.5%, It’s Probably Time to Refinance

Time is money. And in perhaps no other area does this ring truer than your mortgage. The overall cost of your mortgage is a direct result of the time, or term, for which is financed. A lower rate, even over the same time period as the original term, can lead to substantial savings. Sometimes, significantly lower rates can even lead to a shorter term.

Rewind things a few decades, and rates were much closer to 20%. While the math may be a little abstract, it means that those monthly mortgage payments would be four to five times larger than they are now for the exact same loan. That’s not just a daily cup of coffee, that’s a lifestyle difference. It also means that you may have been looking for a very different house.

While the term historically low sounds almost cliché, it can mean a truly significant, à-la historical, shift in your mortgage payment. This is money that can be reallocated to other things like purchasing a new car, paying those unexpected bills, starting a college fund, or making those weekly restaurant runs a little less guilt-inducing.

In addition to the immediate benefits of more cash in your pockets, the principal comes down at a quicker rate. If you want to pay off your mortgage sooner, the savings can literally accrue over the life of the loan. You may even want to consider refinancing for a shorter term to make the goal of paying off your mortgage obtainable in a shorter period of time.

If you are living in a home that you previously financed, even as little as 12 months ago, it’s time to take a look at your mortgage and see if a refinance makes sense for your situation. There are a variety of details that factor into a refinance, but you can start with a single point of focus.

This begs the question: 

At What Point Does It Make Sense To Refinance?

With these low rates, we recommend that you start seriously considering a refinance if your current rate is above 3.5%. 

The market rates have shifted, notably, from even what they were at the beginning of 2020. As much as everyone has been introduced to new and unexpected changes over the past few months, mortgage rates have experienced tremendous downward pressure. This results in the lower mortgage rates that you’re probably hearing about.

If your rate is above 3.5%, this is the point where you need someone you can trust to review your mortgage and determine if it indeed makes sense to refinance. As always, each situation is unique and, in some cases, it may not make sense to refinance upon further review.

We also encourage prospective refinancers to talk to us first. Let us help you prior to making any major moves to pay off other debt or close out accounts that may significantly affect your credit score. With our guidance, we can help you navigate the refinance process and answer any questions that you may have.

A Simple And Quick Example

To provide you with a simple example, let’s say John Doe currently has a 3.65% interest rate on his mortgage of $100,000 over 30 years. He is happy in his current home and would like to put back a little more to pay for his two kids’ college funds.

John currently pays a mortgage payment of around $475/month.

If he refinanced at a competitive rate, he would reduce his payment potentially around $60/month. This is a significant savings, and it would make a lot of sense for John to at least consider the thought after he reviews everything with his qualified loan broker.

However, this overly simplistic example is just that. Each mortgage situation is unique, and that is why you want to let the experts at Range Lending take a look at your circumstance and help determine what works best for you. Other factors involved in the refinance process include your credit score and loan-to-value(LTV) ratio, which can affect the rates for which you qualify. 

If your current mortgage rate is over 3.5%, then get started today with Range Lending. Check out our mortgage calculator to see what your payment would be at a different interest rate. We provide exceptional speed, service and selection of loan products.