Home
Classifieds
New & Used Cars
Coupons
Jobs
Obituaries
Events
Movies
Weather
News
Sports
expert

Expert Column

Should You Refinance Your Home Mortgage?
Should You Refinance Your Home Mortgage?
by Amy Murray

Housing costs are one of the largest components of most household budgets. With interest rates changing so frequently, you should periodically determine whether refinancing at current interest rates would save you money.

To determine whether you should consider refinancing you need to compare the costs of obtaining a new mortgage with the savings you will enjoy with a reduced interest rate. You my also want to consider refinancing to a different type of mortgage, such as switching from a 5-year balloon to a 15-year fixed rate mortgage.

Here is an example and a worksheet that will help you determine if refinancing makes sense for you. You may want to print this article and use the worksheets. Rick and Carol have a home they bought 3 years ago for $300,000 and they have 5 years remaining on balloon mortgage of $200,000 with an interest rate of 6.25%. Their monthly payments are $1231.43. They intend to live in their home for several years and would like to lock in a 30-year mortgage with a 4.375% fixed rate.

Rick and Carol's Example

New Mortgage Costs
Discount points (in $) $ -
Origination points (if any) $1500
Application fee $475
Credit check fee $ -
Attorney fees (yours) $ -
Attorney fees (lender's) $ -
Title search fee $ -
Title insurance fee $ -
Appraisal fee $ -
Inspections $ -
Local fees (taxes, transfers) $ -
Other fees $360
Total cost of new mortgage $2335

Calculating the Savings
Monthly payment on current mortgage $1231.43
Monthly payment on new mortgage $998.57
Difference between two mortgage payments $232.86
Divide total fees on new mortgage by monthly savings - This is the number of months to recover your costs. 10 months

In this example, Rick and Carol would save almost $2800 annually in mortgage payments and lock in a 30-year fixed rate mortgage. Over the course of the mortgage they would pay about $83,000 less in total interest.

Worksheets for you to use

New Mortgage Costs
Discount points (in $) $
Origination points (if any) $
Application fee $
Credit check fee $
Attorney fees (yours) $
Attorney fees (lender's) $
Title search fee $
Title insurance fee $
Appraisal fee $
Inspections $
Local fees (taxes, transfers) $
Other fees $
Total cost of new mortgage $

Calculating Your Savings
Monthly payment on current mortgage $
Monthly payment on new mortgage $
Difference between two mortgage payments $
Divide total fees on new mortgage by monthly savings - This is the number of months to recover your costs.

There are mortgage refinancing calculators found on many websites that can make the calculation easier. Many sites include calculators to determine monthly payments for any size mortgage with any interest rate.

Other Considerations
When reviewing the feasibility of refinancing, you may also wish to consider refinancing a larger or smaller amount than the current balance of your mortgage. If you have excess funds available and believe you will have a hard time earning a return greater than the mortgage rate, you may want to pay down your mortgage and get a new mortgage that is smaller. If you have other liquidity needs, you may want to refinance a larger amount to free up some of the equity in your home.
Remember that mortgage interest is tax deductible if you itemize your deductions on your tax return. Consult your tax advisor to see how this may apply to your situation.

Final Thoughts
No interest rate environment lasts forever. Unfortunately there is no crystal ball that will tell you when rates have reached their lowest level. Taking action now to evaluate whether refinancing now makes economic sense, and evaluating the type of mortgage you want can help you be in control of one of your largest household expenses.

Amy Murray is a Mortgage Officer at F&M Trust. She can be reached at (717) 597-2931.

F&M Trust
http://www.fmtrustonline.com

F&M Trust
F&M Trust

20 S MAIN ST
CHAMBERSBURG, PA

(717) 264-6116

518 NORTH ANTRIM WAY
GREENCASTLE, PA

(717) 597- 238

1712 LINCOLN WAY EAST
CHAMBERSBURG, PA

(717) 264-9414

5293 MAIN STREET
MARION, PA

(717) 375-2210

2 PARK STREET
MONT ALTO, PA

(717) 749-3161

870 NORLAND AVENUE
CHAMBERSBURG, PA

(717) 262-2085

13 SHIPPENSBURG SHOPPING CENTER
SHIPPENSBURG, PA

(717) 530-2100

2405 PHILADELPHIA AVENUE
CHAMBERSBURG, PA

(717) 264 5122

1712 LINCOLN WAY EAST
CHAMBERSBURG, PA

(717) 261-3675

150 LINCOLN WAY
CHAMBERSBURG, PA

717-264-6116

841 WAYNE AVENUE
CHAMBERSBURG, PA

717-264-6116

1100 LINCOLN WAY WEST
HAMILTON TOWNSHIP, PA

(717) 263-9168

6962 LINCOLN WAY WEST
ST. THOMAS, PA

(717) 369-3240

200 EAST MAIN STREET
WAYNESBORO, PA

(717) 762-2188

7781 WATERFALL ROAD
HUSTONTOWN, PA

(717) 987-3193

PENN'S VILLAGE SHOPPING CENTER
MCCONNELLSBURG, PA

(717) 485-3167

100 LINCOLN WAY EAST
MCCONNELLSBURG, PA

(717) 485-3144

560 GREAT COVE ROAD
WARFORDSBURG, PA

(717) 294-3288
We are a community bank in Franklin and Fulton Counties, PA, offering personalized service for over 100 years.
Website