I don’t know about you, but with the economy the way it’s been the last couple of years, the concept of “savings” has kind of gone out the window. A couple of years ago, Wife and I made a decision that since the traditional savings vehicles were pretty much in the crapper (a savings account yields about 1% these days if you’re lucky, the stock market has been more volitile than it’s been for years, 401k… what 401k) we were going to have to get creative.
About 16 months ago, we decided to refinance our home. We got into a 15 year mortage at 4.125% which at the time was the best rate going. Our “savings” is now going toward paying off that mortgage and got us to the point where by the age of 50 we’ll be free of a payment (if we stay in the house)… #winning.
If you’re keeping up on mortgage rates, you’ll know that we’re at historically low rates in this country so we decided to look into it to see if it made sense to do it again. I emailed my guy to see what we could get and to run some numbers. He said that we could get into a 15 year at 3.0% which would lower our payment by $125 a month and that we should definitely do it. Closing costs would “only” be $2,500 which could be rolled into the loan. He went on to say that we’d save over $22,000 over the course of the loan. Sounds like a no brainer right?
Not so much.
I ran my own numbers, this time taking into account that I was already 16 months into a 15 year mortgage. The difference over the course of the loan was now just over $1,000 and that didn’t take into account the closing cost. So if I went through with this refinance, I’d actually be LOSING $1,500 over the course of 15 years. Needless to say we decided not to move forward.
Here’s the thing that really kind of pissed me off. Dude KNEW how long I’d been in my current mortgage. Not only did I tell him how long we’d been in (and at what rate) but he was the guy that WROTE THE PREVIOUS MORTGAGE. I won’t tell you what bank he’s with, but I will say that it’s not 6/4th. I’m thinking he saw an easy mark and was looking to make a quick buck on my refi.
My point? Run your numbers folks. Just cause the rate is lower (and very attractive) doesn’t mean that it makes good financial sense. I could have gotten into a rate that was nearly a full percentage point lower and still lose money over the course of the loan. Do your homework folks.
Now… I need to figure out our next savings vehicle. There are many ways you’re able to look at re-mortgaging as there are many deals on the market. For instance, you live in Canada then possibly having a look at, Mortgage brokers Toronto to help you re-mortgage your home.