The current juggling of interest rates by the Federal Reserve is an effort to jump-start a sluggish economy and lower unemployment numbers due to COVID-19. Mortgage rates still remain low, although they have inched up slightly as the economy begins to show signs of gaining strength.
If you’re considering refinancing your mortgage, visit Credible to explore all of your refinance options and compare rates from multiple mortgage lenders in one place. Then ask yourself — is it worth refinancing your current mortgage for a new loan that has an interest rate 1% lower than the current one?
The answer may be yes.
What is a mortgage refinance?
When you refinance your current mortgage with a new loan, it’s called a mortgage refinance. Doing so is like bringing in additional income every month, especially if your new loan has a better rate and term.
When you refinance, you pay off the balance on your current mortgage with a new loan.
You might consider refinancing to:
- Lower your interest rate
- Shorten the term of your loan
- Convert the equity in your home into cash
- Move from a variable rate to a fixed-interest rate loan
- Reduce your monthly payments
- Get rid of private mortgage insurance (PMI)
Maybe you simply want to change mortgage providers. If that’s the case, visit Credible to explore all of your mortgage refinance options and compare rates and lenders in one place.
Is it worth refinancing for a 1% lower rate?
Most experts agree that it is worth refinancing if you can lower your rate by 1% or more. It may not sound like a lot, but over time your savings can add up.
For example:
- Your current mortgage loan was $350,000. After paying down your loan for 10 years, your balance is $270,994.00. Your current rate is 3.50%. Your current monthly payment is $1,571.66.
- You can refinance for a rate of 2.50%, which lowers your rate by 1%. Your new monthly payment will be $1,436.01, a savings of $135.65 per month.
Reducing your rate by just 1% will save you a total of $32,556.25 over the life of your new mortgage loan.
Although your rates and savings will vary, you’ll get an even better understanding of just how much you can save on monthly mortgage payments by using Credible’s free online tool.
