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With 4% mortgage rates, is a refinance worth it?

September 30th, 2011 at 1:10 pm | Type:

Author: admin | Comments Off

With historically low interest rates in the mortgage market, I wanted to illustrate how much $$ refinance an existing loan will save you.

This Table breaks down how much you will actually save by doing a refinance with today’s absurdly low interest rates. I used the average APR rates on google.com with a credit score of 700-900.  It’s possible to break even and start saving $ on a refinance after only 14 months! I used a $350,000 loan for my example and gave a 30 year fixed and 5 year ARM refinance option.

Your current home loan:
Original loan amount
  • $350,000
Interest rate
  • 6%
Loan type  30 Year Fixed Approximate date of your first payment
Refinance options
Your current home loan Refinance option 1 Refinance option 2
Remaining loan amount $346,801 $346,801 $346,801
Loan type 30-year fixed
Interest rate 6%
  • 4%
  • 3.5%
Closing costs
  • $6,069
  • $4,573
Monthly payment $2,098 $1,656 $1,577
Time to break even 1 year and 2 months 9 months
Interest to be paid
5 years: $100,480
Total: $389,747
5 years: $66,213
Total: $249,244
5 years: $59,404
Total: $220,816 (at 3.6%)

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