## Does Refinancing your Mortgage Benefit you?

“Should I refinance my mortgage?” is a very common question. But the better question is, “Does refinancing your mortgage benefit you?” If you can answer this question, you can answer the original question.

Refinancing your mortgage either significantly benefits you (i.e. your debt payments decrease, you have more cash available to spend, etc.) or it does not. It’s that simple.

In this post, I am going to show you an example of what can happen when you refinance your mortgage. Once you see the numbers, you can ask yourself, “Does this benefit me?” Then you’ll be able to answer, “Should I do it?”

## Refinance Calculator

Before we begin the example, note that the refinancing calculations below were all done using my free mobile mortgage calculator app. If you want to download the app so that you can run specific scenarios tailored to your life, then you can download it here:

**Get my mortgage calculator app**

Okay, let’s start with the example!

## Your Current Situation: Before Refinancing

Let’s imagine this is your current situation.

The following table shows your current mortgage is at a rate of 2.5% with a 25 year amortization and it shows all your other outstanding debts. Your monthly total debt payment is $2794.47.

Your Current Budget |
Outstanding Balance |
Monthly Payment |

Current Mortgage: 2.5%, 25 year amortization | ||

Mortgage Payment | $400,000.00 | $1,794.47 |

Car Payment | $18,000.00 | $500.00 |

VISA | $10,000.00 | $300.00 |

Line of credit | $12,000.00 | $200.00 |

Total Monthly Obligation | $440,000.00 | $2,794.47 |

## Refinancing Scenario A

Now let’s see what happens if you refinance your mortgage at a rate of 1.9% with a 25 year amortization and use the new mortgage to pay off all your debts.

Your New Budget, A |
Outstanding Balance |
Monthly Payment |

New Mortgage: 1.9%, 25 year amortization | ||

Mortgage Payment | $440,000.00 | $1,843.61 |

Car Payment | $0.00 | $0.00 |

VISA | $0.00 | $0.00 |

Line of credit | $0.00 | $0.00 |

Total Monthly Obligation | $440,000.00 | $1,843.61 |

Your monthly debt obligation has been reduced by $950.85/month to $1843.61!

Does that benefit you? Would your life be better with an extra $950 every month?

## Refinancing Scenario B

Let’s go one step further and see what happens if you refinance your mortgage at a rate of 1.9% but with a 30 year amortization.

Your New Budget, B |
Outstanding Balance |
Monthly Payment |

New Mortgage: 1.9%, 30 year amortization | ||

Mortgage Payment | $440,000.00 | $1,604.41 |

Car Payment | $0.00 | $0.00 |

VISA | $0.00 | $0.00 |

Line of credit | $0.00 | $0.00 |

Total Monthly Obligation | $440,000.00 | $1,604.41 |

In this case, your monthly debt obligation has been reduced by almost $1200 to $1604.41!

Does that benefit you? Would your life be better with an extra $1200 every month?

If your answer to that is yes, then it seems the answer to the question “Should I refinance my mortgage?” would be clear.

Or maybe it would be clearer if you ask this question, “Why wouldn’t I do it? Why wouldn’t I take the extra $950 or $1200 per month?”

## Should you Refinance your Mortgage?

Ultimately, you can only answer the question “Does refinancing my mortgage benefit me?” after some analysis as it depends on the numbers such as your total debts, the new mortgage rate you could get, etc.

At the very least, it’s worth running the numbers to see if there is indeed a benefit for you in your current situation.

If you want someone to run the numbers for you, feel free to contact me. I’d be glad to do it for you.

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