We have a second home that we currently rent out. It has a mortgage with a 5.5% interest rate. Is it worth it to refinance for a lower rate?
Answers | 2
If the new loan will cost you $2000, and you will be saving $200 a month, it will take 10 months of the new payment before you've actually saved any money. That's your break even time. Will you be keeping the house longer than that? How long? Any other changes coming?
At 5.5 today, there is room to get a lower rate. You might even settle on a lower rate with no closing costs. That will have a smaller monthly savings, but your break even will be immediate. Talk to your local mortgage guy about options.
So your answer is "do the math." Cost/monthly savings=time to break even. Base your decisions on the rest of your financial plan as to whether that makes sense for you.