“I’m 67 years old and looking to retire in 3 years at age 70. I wanted you thoughts on refinancing our home. Our current mortgage is $836 per month @ 7.8% and has 12 years out of 30 left. The refinancing proposal is $629 per month @ 3.5% for 15 years. My social security income at retirement will be $3000 per month. My 401K balance is currently $235,000. This saves us $207 per month and reduces the total cost of the loan by $7000. The initial closing cost is $1100.”
Thank you so much for asking such a timely question with such a pleasant outcome.
Mortgage rates are at an incredibly low level right now. You may wish to shop around a bit. Your proposal cuts your interest rate down to 3.5%, but I have heard rumors that some mortgages are carrying even lower rates. You also might wish to ask about securing a new mortgage with the same twelve year term you currently have. Your savings won’t be quite as high, but you will be free and clear three (3) years sooner. You might even consider looking at a mortgage that keeps your current $836 payment and (with the lower interest rate) pays off your mortgage even faster.
One last point. If you were to accept the proposal as stated you would spend $1,100 to save $207 a month. In other words, you will get your up-front cost back in less than six (6) months. After that – gravy. Pretty sweet.
Gene answers your neighbors financial questions on More than Money.
Send in your concerns: Gene@AskMtM.com