Time to Refinance?

Posted by Madison on January 15, 2009

It’s a good thing I don’t have a job! Or else I’d be refinancing again… I think in the past 7 years, we’ve had 3 houses, and at least 8 mortgages! It seems like every time I turn around there is a lower rate, or a better loan. I turned into a refinance junkie.

I received a few emails and calls over the last few weeks asking about refinancing. Lots of the questions revolve around when it’s the right time to refinance and how do you know if you should.

I gave some pointers last spring in Are You Considering a Refinance? Here are more details on the break even point and where to find a great rate, two of the key concepts in a successful refinance.

Calculate Break Even Point

Calculate your break even point. This will let you know how long it will take you to recoup the money you spend on a refinance. After the break even point, you’ll come out ahead. If you plan to sell or move before the break even point, you are better off staying with your current rate.

I couldn’t help but plug in our current rate at 5.125% and see that we’d break even in about 16 months. More about our mortgage is described in The Perfect Ten Year Mortgage.

Here’s another good break even calculator.

Where to Look for Best Rates

If you are shopping around, here are the places that I generally look first.

  • Pentagon Federal Credit Union. I always start here. We’ve had about 4 mortgages with them, including our current mortgage. They usually have fantastic rates, great loans, and superb customer service. In addition, if you have a jumbo loan like we do, they’re usually the place to go.
  • Fat Wallet Forums. This thread a Fat Wallet has a lot of dedicated contributors that watch the rates close to daily. If there is a great national rate out there, it’s usually in here.
  • You can enter your personal information online and get four offers. It’s free, and worth giving a shot to see if they can beat some of the other rates you find.
  • Local banks and credit unions. I found a dirt cheap rate for some friends in the Milwaukee area, but the bank is local only. Be sure to check with your current bank, and others in your area. Ask if they’ll match another rate you find.

More on Refinancing

Refinancing is a hot topic right now because of the low rates. For further reading check out:

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Comments to Time to Refinance?

  1. It’s funny, I just received two junk mail letters yesterday saying that I could refinance or qualify for a restructured loan. Both letters overstated my current mortgage amount by $100,000 and said the stats came from public records. My loan amount was never that high and makes me wonder if they were trying to get me worked up. My current mortgage is for 5% and I would be tempted to refinance if rates dip below 5%.

    The Passive Dad

  2. We refinanced our house last spring when it looked like rates couldn’t dip any further. I couldn’t imagine at the time that they would go even lower than that. We got a good rate at the time and I think I’m gonna stick with it.

    Travis @ CMM

  3. Great tips. I would also advise that you check out BankRate as well for mortgage rates in your area. It’s free and it gives you a good idea. A year ago I found a great rate through BankRate @ a little less than 6% (not good today, I know, haha)


  4. I celebrated Obama being sworn in as President by locking in 4.5% w/ 1.25 points for a 30 year. Saves me $244 per month. The economy is trashed, might as well take advantage of it. My plans are to continue makeing same level of payments & pay it off in 20.

    Neal Hawes

  5. @ The Passive Dad: Check out Neal’s comment… 4.5% with 1.25 points. Guess it’s time for you to consider!

    @ Travis: You and me both! When we refinanced in the spring, I thought we were getting an amazing rate… six months later and all I can say is WOW!

    @ Tom: Thanks for adding Bankrate to the list.

    @ Neal: I’m jealous!


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