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Dave Says: Refinance For A Lower Payment?

Dear Dave,

How do you feel about people refinancing their homes? Is it smart to refinance a house in order to have a lower mortgage payment?

Anonymous

Dear Anonymous,

No, it’s not. But it is smart to refinance a house to get a lower interest rate. By doing this, you pay off the home faster.

Think about this. Right now, with a 15-year fixed rate mortgage and one point paid, you can get an interest rate under four percent. That’s awesome! Let’s say you have a $300,000 mortgage, and you refinance from six percent to four percent. A two percent savings equals $6,000 a year, and that’s $500 a month in interest saved. In my book, that’s worth doing!

So, refinancing definitely makes sense in cases where you’re going to stay in the home a long time and you get a lower interest rate. Good question!

—Dave

*For more financial advice, please visit daveramsey.com.
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