Everywhere you turn, people are looking at refinancing. Let’s face it, the rates are so low — it’s tempting. But is it really the best idea for you?
What Matters Is the Interest that Will Be Paid Over the Course of the Loan!
Refinancing may not always be the best idea, according to Michael Joyce in this story for Richmond’s NBC 12. Michael tells homeowners they shouldn’t refinance unless the interest they will pay over the course of a new mortgage loan will be less than what they are currently scheduled to pay.
Michael Joyce says mortgage rates are the lowest he’s seen in his entire career. But he says — you don’t want to get hung up on the low rate. Instead, you want to look at how much interest you’ll be paying.
“The way mortgages amortize you pay the most interest on the first payment and then the amount of interest that gets paid with each payment goes down the further you are into the mortgage. You could have a case that you’re 8, 9 or 10 years into a mortgage with a higher rate but if you refinance at a lower rate you could end up paying higher interest,” Joyce says.
So, it’s important to factor this in before you get seduced by the low rates out there. You don’t want to just assume refinancing is the best option without first doing a little research and some basic math.