It seems like we just went through this, but that’s because we just refinanced our house late last year. I was confident that we would never do it again, but I was wrong. We currently have a 3.25% interest rate, and I just locked in a 2.625% rate with Aimloan.com.
We refinanced with Aimloan before, but this time I was determined to find a better rate elsewhere. After doing a whole bunch of searching, they were the cheapest now as well. Since I’ve gone with them before, I now know exactly how they work. The rates they advertise on their home page are lower than anywhere else, but they have higher closing costs. So right now on their site, you’ll see a 2.5% interest rate on a 15 year fixed mortgage with 0 points. I still chose the 2.625% though, because the closing costs go from ~$2700 to ~$1800. Since I’m paying the closing costs out of pocket (so they don’t get added to my loan amount), I wanted to keep the costs as low as possible. The difference in interest rate is only a few dollars per month, so it doesn’t make sense to add $900 to the closing costs.
I will actually have around $1600 in closing costs though, because I did my research when we refinanced last time, and found a title company close to where I live that does an excellent job and has lower fees. I’d suggest you do the same if you refinance, as it can save you some money.
Our monthly payment will drop by $120/mo, but it will add about a year’s worth of payments from the beginning of our other loan. I looked at what our payoff date would be if we put that $120/mo back into the loan every month, so we still pay the same as what we do now, and we would pay the loan off 6 months quicker than our existing loan! And by refinancing and paying extra every month, we’ll save almost $10k ($11,200 – $1600 in closing costs).
You might think that it was foolish to refinance last year and again this year, but I did the math on that as well. It wasn’t as bad as you might think. We paid our house down by an additional $6000 than we would have with the older loan. I know some of you might say that we could have paid that down even with the old loan, but the reality of the situation is that we wouldn’t have done that. Even if we did force ourselves to pay the extra amount, refinancing still only costed us around a hundred dollars more, based on the difference in interest rates and closing costs we paid. We were almost to the break even point.
I’ve learned my lesson in saying that this is the last time we’ll refinance, but rates would have to drop to around 2% or lower for it to make sense again. We’ll see how it goes. But if you have a rate around our current amount (3.25%) or higher, you might run the numbers for yourself to see if it makes sense to refinance. It did in our situation.