 | Richard Ciemny is Vice-President, Director & Branch Manager of The First National Bank of Anthony, Wichita Branch. Richard has been in the banking profession for many years in the Wichita area. He has been an active member of the Kansas Bankers Association and the Community Bankers Association of Kansas. The First National Bank of Anthony, Wichita Branch, is located at 10111 W. 21st St. North. You may contact Richard at (316) 721-9000. |
Banking & Finance
2002-12-01 09:46:00
Should I re-finance now?
: Should I Re-finance?
ANSWER: This is a complex question and varies based upon an individuals situation. In addition to lowering your monthly payment and saving money, some of the more common reasons to re-finance include; conversion of an adjustable rate loan to a fixed rate loan, reducing the term of your loan (30 year to 15 year), convert your equity to cash which can then be used to pay other debts, invest or spend at will. The general rule of thumb if you're re-financing to reduce your monthly payments has always been the 2% rule. If you can reduce your interest rate by 2% then it makes sense to re-finance.However, a better way to approach this might be to calculate your costs recovery period. This is how it would work:Example:a. Determine the costs of your re-finance. $2,000b. Determine your monthly savings (old payment minus new payment) $100c. Divide the results in (a.) by the results in (b.) ($2,000/$100 = 20 months)The number of months needed to recover your costs in this example is 20 months. If you were planning to live in the house for longer that 20 months then you would be money ahead and it would make sense to re-finance your loan. ( This calculation does not include the impact of tax savings or investment opportunity loss).
