Refinancing���Again
I HAD A NEW HOME built in 2017. I financed it with a 30-year mortgage at a 3.875% interest rate.
Early last year, when interest rates dropped due to the pandemic, I suggested that readers refinance. I took my own advice, replacing my 30-year loan with a 15-year mortgage at 2.99%. The cost of refinancing seemed well worth the reduction in my loan interest rate.
Two months ago, I saw that mortgage rates had continued to decline, so I refinanced again. My existing mortgage company gave me a new, 15-year loan at 2.375%. I didn���t want to pay the upfront costs to refinance, but I didn���t have to: My current lender waived them because I was already a customer.
For those keeping score at home, the interest rate I pay has fallen 39% over the past four years. I started with a low-rate mortgage���and wound up with one that���s rock-bottom.
Readers may wonder whether I should pay off my mortgage entirely. I���ve decided I���d rather have more liquidity���by keeping more money in cash. True, my cash account pays just 1.35%, a lower rate than I owe on the mortgage. But I see my savings as insurance against an emergency. On top of that, with a healthy cash balance, I won���t be tempted to draw on the equity in my home for some big expense.
No one knows if and when interest rates will rise again. But I���ve locked in low rates for the duration. If short-term rates do rise, my mortgage payment won���t change. My cash account, however, may pay me more money.
Early last year, when interest rates dropped due to the pandemic, I suggested that readers refinance. I took my own advice, replacing my 30-year loan with a 15-year mortgage at 2.99%. The cost of refinancing seemed well worth the reduction in my loan interest rate.
Two months ago, I saw that mortgage rates had continued to decline, so I refinanced again. My existing mortgage company gave me a new, 15-year loan at 2.375%. I didn���t want to pay the upfront costs to refinance, but I didn���t have to: My current lender waived them because I was already a customer.
For those keeping score at home, the interest rate I pay has fallen 39% over the past four years. I started with a low-rate mortgage���and wound up with one that���s rock-bottom.
Readers may wonder whether I should pay off my mortgage entirely. I���ve decided I���d rather have more liquidity���by keeping more money in cash. True, my cash account pays just 1.35%, a lower rate than I owe on the mortgage. But I see my savings as insurance against an emergency. On top of that, with a healthy cash balance, I won���t be tempted to draw on the equity in my home for some big expense.
No one knows if and when interest rates will rise again. But I���ve locked in low rates for the duration. If short-term rates do rise, my mortgage payment won���t change. My cash account, however, may pay me more money.
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