One of the biggest reasons people choose to refinance their mortgage is to save money and get a lower interest rate. What if your new interest rate is only .5 percent lower than your old interest rate? What if you’re only saving $100 or $200 a month? Is refinancing still worth it? The answer is yes.
Why refinancing to save this little is still worth it.
Saving .5% on interest or only $100-200 per month may seem insignificant. However, if you don’t refinance again for a while, even a slight reduction can make a significant difference in your savings. For example, if you have a $400,000 home loan with a 25-year term and an interest rate of 3.5%, you’d pay $2,002 monthly. However, keeping everything the same and reducing your interest rate to 3% means you’d pay $1,897 monthly. This slight decrease can save you $1,260 per year and $6,300 over five years. If you keep the same interest rate over the rest of your 25-year loan term, you could save $31,500.
Similarly, saving $100-200 dollars per month can save you $1,200-$2,400 per year. Those savings multiplied over the length of your loan term could save you tens of thousands of dollars.
Items to consider before refinancing
While even slight savings monthly can be significant over your loan term, there are a few items you should keep in mind before refinancing:
- The costs and fees associated with refinancing, such as break costs
- Property valuation costs
- Application fees
- You may have to pay LMI again
If you are looking to refinance your existing home loan, Mortgage House can help find you the home loans with the lowest interest rates and best features, saving you thousands of dollars over the years.
