Personal Finance News Tuesday 5/7

Phil's Personal Finance Tip of the Day:

Refinance now for big savings

Take advantage of historically low interest rates and save big money by refinancing now.

By Jennifer Berry | Yahoo! Homes – Fri, May 3, 2013

 

 

When did you buy your house? Chances are, if it was more than a few years ago and you haven't refinanced, current interest rates are lower than what you got when you initially took out your loan.

And lower interest rates mean less money spent on your mortgage.

Wondering how to take advantage of these low rates? Read on to learn about three strategies for refinancing - and how they could help you pay less on your mortgage.

Strategy #1 - Lower Your Interest Rate by at Least .5 to 1 Percent

If you want to cut down your monthly payments, refinancing your mortgage to the same terms as you have now - but at a lower interest rate - is one solution.

According to a "December 2012 U.S. Economic & Housing Market Outlook" published by Freddie Mac, "mortgage rates fell to 65-year lows after the Federal Reserve began its third round of quantitative easing in September [of 2012]." This basically refers to the U.S. buying mortgage-backed securities in an effort to artificially stimulate the economy. And Freddie Mac expects rates to remain near record lows for the first half of 2013, though they might start going up at the end of this year.

"[Refinancing to a lower rate] can save someone a lot of money," Manke says. "Though it depends on the amount of reduction in the interest rate you'd need to make it ideal. One percent or [higher] is great, but sometimes it can even make sense to refinance for as little as half a percent reduction - as long as the costs of the loan are minimal and you're going to stay in the house for long enough to recoup the costs of the loan."

The Numbers: Let's say you've got a 30-year fixed $200K mortgage with a 4.5 percent interest rate. How would your situation change if you could refinance to a new loan at 3.5 percent? Let's plug in the numbers.


To read the entire article from Jennifer Berry | Yahoo! Homes:
http://homes.yahoo.com/news/refinance-now-to-save-big-011748759.html


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Hi my name is Philip J. Miano and I am the founder of PJM Personal Finance and Productivity Coaching specializing in Budgeting, Debt Reduction, Bank Reconciliations, Goal Setting, Time Management, and Organizational skills. Please visit my website: http://pjmcoaching.com.