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  • Do You Need to Refinance?

  • Making the most of your hard earned money is important to you and your family, so wasting it on a payment (or payments) that are too high is just not right! That's why structuring your mortgage payments to the most optimal by refinancing your current home is always something to consider.

    There are many different avenues of making refinancing work for you:

  • Lowering Your Interest Rate

    Of course, this is the most popular reason for refinancing mortgages. With a lower rate you are obviously paying a lower payment on the same mortgage. An example of how you can dramatically lower your payments is as follows:

  • Old vs. New Loan Comparison

    Loan TypeBalanceInterest RateMonthly PaymentTotal Payments (30 yrs)Total Interest
    Old Loan $150,000 9.00% $1,197.94 $431,258.40 $281,258.40
    New Loan $150,000 4.50% $760.03 $273,610.80 $123,610.80
    Savings – – $437.91 $157,647.60 $157,647.60
    Break-Even Consideration: Assuming refinance costs of about $3,100, your monthly savings of $437.91 means the break-even point occurs in approximately 7 months. This refinance is likely beneficial if you plan to stay in your home for 2+ years.

    Combining Two Loans Into One

    Combining first and second trust deeds simplifies payments and can save thousands in interest. Second loans often carry high interest rates (11%–16%) and unfavorable terms, such as balloon payments or interest-only payments.

    Example: First and Second Loan Comparison

    Loan TypeBalanceInterest RateMonthly PaymentTotal PaymentsTotal Interest
    First Loan (30 yrs) $150,000 6.50% $948.10 $341,316.00 $191,316.00
    Second Loan (15 yrs) $50,000 12.00% $712.86 $128,595.60 $78,595.60
    Combined Loan (30 yrs) $200,000 4.50% $1,013.37 $364,813.20 $164,813.20
    Monthly Savings $647.59 $104,000+ (interest savings over time)
    Break-Even Consideration: Assuming refinancing costs of about $3,000 in fees, the monthly savings of $647.59 means the break-even point occurs in approximately 5 months. This combined loan may be especially beneficial if the homeowner plans to stay in the property for 5+ years.

    Changing From an Adjustable to Fixed Rate Loan

    Many homeowners initially obtained adjustable rate mortgages (ARMs) to qualify for more home. Circumstances may have changed since then: interest rates could have dropped, or household income may have increased. Converting from an ARM to a fixed rate loan is usually advantageous, providing stability and predictability in monthly payments.

    Loan TypeBalanceInterest RateMonthly PaymentTotal Payments (30 yrs)Total Interest
    Old ARM $200,000 6.50% (adjustable) $1,264.14 $455,088.00 $255,088.00
    New Fixed Loan $200,000 4.50% $1,013.37 $364,813.20 $164,813.20
    Monthly Savings $250.77 $90,274.80 (interest savings over time)
    Break-Even Consideration: If refinancing fees are around $3,000, the monthly savings of $250.77 gives a break-even point of about 12 months. This is a good move for homeowners planning to stay in their home for 2+ years while locking in a stable, lower rate.

  • Frequently Asked Questions About Refinancing

    Why should I consider lowering my interest rate through refinancing?

    Lowering your interest rate reduces your monthly mortgage payment and the total interest paid over the life of the loan. For example, dropping from 9.00% to 4.50% on a $150,000 loan can save over $437 per month.

    Is it beneficial to combine two mortgage loans into one?

    Yes. Combining first and second trust deeds simplifies your finances into one monthly payment and often eliminates high-interest second loans (which can range from 11%–16%), potentially saving you hundreds of dollars monthly and thousands in long-term interest.

    Should I switch from an Adjustable Rate Mortgage (ARM) to a Fixed Rate?

    Converting to a fixed-rate loan provides long-term stability and predictability. This is especially advantageous if interest rates have dropped or if you plan to stay in your home for several years, as it locks in a lower rate and protects you from future market increases.

    What is the "break-even" point in a refinance?

    The break-even point is the time it takes for your monthly savings to cover the costs of the refinance. For instance, if a refinance costs $3,000 and you save $437 per month, your break-even point is approximately 7 months.