Consumers who want to save money and have a mortgage should consider refinancing. Conventional wisdom is that consumers should refinance if there is more than a two percent reduction in interest rate, but borrowers need to consider other aspects.
Reducing Payments by Refinancing
The first step in determining whether to refinance is pull together the pertinent data. The information needed includes:
- The current interest rate, unpaid balance and term (years remaining)
- The new interest rate
- Costs associated with the financing, including points
Microsoft Excel has an easy function to determine payments based on the above information. Consider the following example:
