Home Guides & Resources chevron_right Financial Planning chevron_right Investing for Life Should You Refinance Your Mortgage Now? March 6, 2020 The Fed’s action this week sent the average rate on a 30-year fixed mortgage sinking to 3.56%, the lowest level since 2016. Many of our clients have asked if now is a good time to refinance. A simple question on its face, but the answer can be complicated. Here are four factors to consider before rushing to engage a mortgage broker: How much can you save? It’s worth digging out and reviewing the paperwork for your existing loan to confirm the exact rate you’re paying now and what your original closing costs were. Follow that up with a trip to an online mortgage calculator—you can try Bankrate, Zillow or use your bank’s website—to estimate the difference in your monthly payment and how much you could save by refinancing. What are the costs? As when you bought your home, there will be closing costs associated with a refinance. These range anywhere from 2% to 5% of the total principal of the loan and can vary by lender and region. Your current loan documents should provide a general sense of the costs you’ll face. By dividing your estimated monthly savings from a refinance into your total closing costs, you can determine approximately how many months you’ll need to stay in your current home to make the refinance pay off. If there’s a good chance you’ll be moving before the time is up—a career change, to downsize or you plan to retire elsewhere—then the juice likely isn’t worth the squeeze. What rate can you get? No one fills out loan applications for fun, but it’s essential to shop around to make sure you get the lowest rate you can on your refinance. Mortgage lenders are required by the Consumer Financial Protection Bureau to give you a “loan estimate” that compares offers from lenders. Make sure to review not only the interest rates but also costs—some lenders may offer a lowball rate, then tack on higher closing costs. Are you still paying PMI? Beyond simply lowering your rate, another factor is whether you’re paying private mortgage insurance (PMI). Lenders typically require you to pay PMI if you put less than 20% down on your home. Refinancing may allow you to cross that 20% threshold more quickly—getting rid of that pesky PMI and saving you money over and above the difference in your monthly payment. If that seems complicated, here’s one quick rule of thumb: If the difference in interest rates isn’t at least 0.75%, then the refinance probably isn’t worth it. Please don’t hesitate to call your wealth management team with any questions about whether refinancing now is right for you. We’re here to help. About Adviser Investments Adviser is a full-service wealth management firm, offering investment management, financial and tax planning, managed individual bond portfolios, and 401(k) advisory services. We’ve been helping individuals, trustsA legal document that functions as an instruction manual to how you want your money managed and spent in your later years as well as how your assets should be distributed after your death. Assets placed in a trust are generally safe from creditors and can be sold by the trustee in short order, avoiding the lengthy and costly probate process., institutions and foundations since 1994. Adviser Investments and its subsidiaries have over 5,000 clients across the country and over $8 billion in assets under management. Our portfolios encompass actively managed funds, ETFsA type of security which allows investors to indirectly invest in an underlying basket of financial instruments (these may include stocks, bonds, commodities or other types of instruments). Shares in an ETF are publicly traded on an exchange, and the price of an ETF’s shares will fluctuate throughout the trading day (traditional mutual funds trade only once a day). For example, one popular ETF tracks the companies in the S&P 500, so buying a share of the ETF gets an investor exposure to all 500 companies in the index., socially responsible investments and tactical asset allocation strategies, and we’re experts on Fidelity and Vanguard mutual funds. We take pride in being The Adviser You Can Talk To. To see a full list of our awards and recognitions, click here, and for more information, please visit www.adviserinvestments.com or call 800-492-6868. This material is distributed for informational purposes only. The investment ideas and opinions contained herein should not be viewed as recommendations or personal investment advice or considered an offer to buy or sell specific securities. Data and statistics contained in this report are obtained from what we believe to be reliable sources; however, their accuracy, completeness or reliability cannot be guaranteed. Our statements and opinions are subject to change without notice and should be considered only as part of a diversified portfolio. You may request a free copy of the firm’s Form ADV Part 2, which describes, among other items, risk factors, strategies, affiliations, services offered and fees charged. Past performance is not an indication of future returns. Tax, legal and insurance information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice, or as advice on whether to buy or surrender any insurance products. Personalized tax advice and tax return preparation is available through a separate, written engagement agreement with Adviser Investments Tax Solutions. We do not provide legal advice, nor sell insurance products. Always consult a licensed attorney, tax professional, or licensed insurance professional regarding your specific legal or tax situation, or insurance needs. Companies mentioned in this article are not necessarily held in client portfolios and our references to them should not be viewed as a recommendation to buy, sell or hold any of them. © 2020 Adviser Investments, LLC. All Rights Reserved.