Quick Housekeeping Note
If you’ve enjoyed reading Lazy Man and Money this year, or any of the previous 14 years, please nominate me for a Plutus Award. I’ve never won, but I was nominated for a Lifetime Achievement Award several years ago.
I’m not sure what category is the best fit, because I certainly do family, financial literacy for children, real estate, investing, underserved communities (mostly through my MLM content), side hustle, and traditional retirement. I just don’t specialize on any one particular area.
If you want some kind of reason why you should nominate me here’s a brief 14 year history of this blog. I may have been one of the first FIRE blogs… and probably the longest-running one. What’s missing from that article is all the years that I fought the MLM/pyramid scheme industry. I like to think that my 12 million page views have maybe impacted a billion dollars in people’s financial lives. (I don’t know if it’s true, but it sounds like it could be, right?)
I’ve kind of wondered what it would be like to walk across the stage to receive a Plutus Award. I kind of feel like this could be my year… simply because there will be no stage to walk across.
Now let’s get back to the original question
Should I Refinance?
There are a lot of questions that people have asked during COVID-19. One of the ones that may have been overlooked, for obvious reasons, is that there are historically low-interest rates for mortgages. That leads to the question, “Should we (or you) refinance?”
Before I get into our situation, mortgage rates are around 2.74% for a 15-year fixed (our preferred option) or 3.17% for a 30-year fixed according to Bankrate. I’d like to think that most people would be better off refinancing, but a variety of circumstances may make it not work for you. For example:
- You might not have the best credit to get these best rates.
- From what I’ve read, banks aren’t very eager to refinance during these uncertain times
- You might already have a great rate. After all, mortgage rates have been low for a while.
If you have a rate that’s .50% or .75% above those rates that I mentioned above, it might be smart to do an internet search for a mortgage calculator. That will give you an idea if it’s even worth moving forward. If so, it may be time to call some banks. I prefer local banks for mortgages because they know they stand a good chance of getting your other business.
Side note: I completely understand if you are busy managing work and kids during this time. If someone had even suggested that I do anything more a couple of months ago, I would have bit off their head. Things have settleed down with school being out. Hopefully, like me, you have a little more time to move forward with projects and financial things like these.
Our Refinance Situation
We refinanced our home in 2012. It was a particularly great time to refinance. We hit the interest low getting a 2.75% rate on a 15-year mortgage.
You might be thinking… “Umm… that’s today’s rate.”
Yep. On the surface, it wouldn’t make a lot of sense to refinance to the same rate. However, we’ve been living close to paycheck-to-paycheck for a while with 3 investment properties (that don’t make money until their mortgages are paid off), kids’ private school, saving for retirement, and our general costs of living.
This creates a lot of stress. It’s not end-of-the-world stress, but I feel like I worry about money more than I should.
Refinancing would allow us to lengthen the payments over a longer term. On one hand, we’re more than halfway through our 15-year mortgage and only have 7 more years left. On the other hand, refinancing it over another 15-years would lower our payments of $1,061 according to one mortgage interest calculator.
While it’s tempting to have an extra thousand dollars a month, it would mean that we wouldn’t be mortgage-free until 2035. By that time, we’ll all be vacationing on the moon, right? (I’m joking.)
The calculator also said that we’d pay $13,161 more in interest. Yikes, that’s an expensive decision.
In this case, it’s just what the guidelines say… it doesn’t make sense for us to refinance. I was fairly sure that was going to be the case, but it can’t hurt to kick the tires every now and again when the opportunity arises. This is certainly one of those opportunities for many people with mortgages.