The 2% Refinance Myth

by Tom Tousignant

in Blog, Mortgages, Refinancing

It is 1970’s era thinking that interest rates must drop by 2% + to justify the cost of refinancing.
First problem with that: If you are currently at 6% waiting for a 2% drop in rates, you are unlikely to see 4%.
Second problem: In 1978 the price of home was about $38,000 which meant $2000 in closing costs took a while to recoup.

With the average home now closer to $200,000 the dollar savings on smaller interest drops is bigger. Yes, 2% is nice, but not a universal number.

What if you can save $150-200 each month for 30 years? That certainly adds up.
Skip the temptation to make decisions based on rules of thumb. Watch this video. Run the numbers. Make an informed decision based on your circumstances, not rules of thumb you hear on TV.

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