Would it be to my advantage for me to refinance my home? I have never done this before. I have been in my home for approximately eleven years.

I am sixty six years old. Thank you.

Asked by Destinyban

2 Answers

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Answered by Scott Beckwith, Mortgage Broker in Madison, CT
It is very hard to answer that question. It is different for every person since each person has different financial needs and objectives. People refinance to consolidate debt, lower rate, or even improve cash-flow. You should take a moment and speak with a mortgage professional who can figure out what you need in a few minutes with no obligation. | 12.31.15 @ 17:07
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$commenter.renderDisplayableName() — {comment} | 12.04.16 @ 14:40
Answered by David Meyers, Financial Adviser in Palo Alto, CA
Note that any answer I can give you has to include a whole host of assumptions -- and there's no way, in this context to give you an answer which is correctly "yes" or "no" -- your situation is vastly more complex than the question you asked.

That said, here are some things to help you think about it:

a. if you bought the house 11 years ago, sometime in 2004 or 2005, and you got a 30 year mortgage, your interest rate is probably somewhere between 5.75 and 6.25%.
b. you've been paying off your mortgage (but not prepaying -- only paying as much as required) for 11 years, so you've probably paid down about 19% of your original loan.

If you refinanced today, into a new 20 year loan, you'd be extending your loan by only 1 year (since I assumed you got a 30 year loan 11 years ago). The current rate on a 20 year fixed is probably going to be about 4% or so. It looks to me like refinancing that way -- assuming your credit is good and you get the best rates -- will reduce your monthly mortgage payments by about 16%, and only extend the life of the loan by one year. That's a pretty big win. (I ran the numbers assuming a $100,000 loan and your payments go down from about $600/mo to about $492/mo.)

If you don't mind the current level of the payment, you could actually refinance into a *shorter* term loan -- a 15 year -- get a better rate (probably closer to 3.25% or 3.5%) -- have the same (or actually, per my numbers, still a slightly lower) payment -- and have the mortgage paid off several years sooner (in 15 years rather than 19 years -- eventually saving you 4 years of payments -- a very substantial sum).

With 19 years left on a loan, and current rates around 2% lower than your rate is likely to be, chances are that refinancing is a *great* idea -- again, if your credit is good, you are still employed, etc.

I encourage you to sit down with a fee-only hourly financial planner -- after getting some rate quotes from a mortgage guy -- and walk though the scenarios, taking into consideration your full picture -- your income, your spending, your expenses, your expected date of retirement, retirement income (SS, etc). There's no substitute for reviewing the entire situation.

But at a glance, it looks very likely that refinancing is a great idea, if my assumptions about your current rate are accurate. | 01.05.16 @ 20:07
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$commenter.renderDisplayableName() — {comment} | 12.04.16 @ 14:40
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