How Do You Know When You Should Refinance?

[Music] brought to you by the every dooll app start budgeting for free today you know George before we get to the phones I thought it might be fun to talk nerdy you know I love talking nerdy I mean you talk nerdy is about as well as anybody I know well you know more big words than anyone I know so we both relate in that way and uh so this is a fun little segment where uh George nerds out on the fine print if you will as the former host of the fine print uh do you still do those you don't do no I miss it we kind of switched it up and did my YouTube channel which is a version of podcast but it's the same thing I want to break down these what are we doing to money Concepts that can feel overwhelming complicated I never fully understood it and I want to break it down quickly for the benefit of the people listening and watching I can't wait what is the topic today refinancing ah so you've heard of financing we're talking about re we're refinancing coming back to the table booah okay and we're going to specifically Focus on refinancing a mortgage okay so if you bought a home when interest rates were high you may be wondering if refinancing might save you some money uhhuh now that rates have dropped a little bit well it can but it also depends so what is this mortgage refinancing very simply it's when you replace your current mortgage with a new one why should you do it why do people do this well number one to get a lower interest rate all right so you got to make sure that refinancing will save you money in the long run more than it costs you number two people do it to reduce the loan term and become debt free faster so you go from a 30-year mortgage or an adjustable rate mortgage to a fixed rate 15-year mortgage for example and that can get you a lower interest rate shorter mortgage payoff get your house paid off sooner double win another reason people do it is to get rid of PMI private mortgage insurance and that's a it's a great way to pay less on that monthly payment because you're not paying the lender anymore and it really just protects them in case you uh foreclose and lastly like I mentioned you're switching the loan type A lot of people have an adjustable rate mortgage and maybe they want to go to a fixed rate mortgage that would be a good time to refinance as well to avoid those rate fluctuations so for everyone out there here's the questions to ask yourself how much will my interest rate go down how much will it save me and what will I pay in closing costs and closing cost can run about 2 to 6% of the total amount you're borrowing depending on your situation where you're at all of that so here's the deal simply only refinance if it gives you a lower interest rate and saves you more money than it costs so an example if you save 2500 bucks a year refinancing but you have 10 grand in closing costs it will take 4 years to break even before you start saving money so refinancing is only a good idea if you plan to stay put long enough to save money so that's kind of where you got to weigh it and go right you know we do plan on staying here long enough to get the ROI on this so it's it's that simple here's six steps if you're ready to do this crunch the numbers to see if it makes sense financially number two you've got to shop around for the best interest rate three you got to choose a lender don't for forget to ask about those closing costs the fees the prepayment penalties a lot of them will lure you in and go oh we're going to give you a great rate but then they ding you with all these fees on the back end to make up for it oh yeah don't fall for that one little uh little uh bait switch they you love that term I was looking for it you helped me out I got there faster quick to the draw you are Cowboy camel here that's it and number four you got to lock in the rate Five you'll go through the underwriting process just like you did when you got the original mortgage and then six you close on the new mortgage good for you so here's deal if you need help you got questions with this about refinancing do what I do reach out to our Ramsey trusted friends at Church Hill mortgage they are experts in this and uh you can go to ramsy solutions.com morgage or click the link in the description if you're listening on YouTube or podcast quick and painless Ken this is why I like talk nerdy I mean we all need a little nerdy talk some people fell asleep at the wheel I don't think so in that segment I think you laid it out beautifully create your free every dollar budget today the simplest way to budget for your life