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Time to consider a mortgage refinance

Print Posted by Cheryl Costa October 5, 2011 08:39 AM

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If you haven't looked into refinancing your mortgage, now just might be the ideal time. With rates for 30 year mortgages at historic lows, investing a few hours of your time to shop for a great rate and gather the documentation required could result in savings of hundreds of dollars per month.

For example, even if you have refinanced in the past two or three years, your rate is likely around 5 percent. Currently, rates for 30 year mortgages are at or below 4 percent for borrowers with good credit. If you can knock your interest rate down a full point, the savings on a loan of $400,000 could be $235 per month or almost $3,000 per year. And if your circumstances are such that an adjustable rate mortgage (ARM) makes sense, your savings could be even greater. For example, 5/1 ARM is available for about 3 percent these days. Savings on a loan of $400,000 would be over $450 with a rate of 3 percent.

With adjustable rate loans, the rate is fixed for a period of time and then it re-sets. With a 5/1 ARM, the rate is fixed for the first 5 years and then it re-sets and it re-sets annually (subject to a cap, which is generally 2 percent per year). So, if you expect that you will move to a new home or a new city in the next 5 years, an ARM can be a fantastic deal.

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Local finance professionals share insights and advice on issues such as budgeting, managing debt, and retirement planning.

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About the contributors

Andrew Chan is the founder of Integrative Financial Advisors in Framingham. He provides comprehensive financial planning advice and investment management services. He has been an adviser for over 12 years and works with clients to integrate all aspects of their finances including investments, retirement, education funding, and tax planning.

Cheryl Costa is a principal at Forteris Wealth Management which is an independent, fee-only firm with offices in Framingham and Purchase, NY. She advises clients on investing, education funding, taxes and retirement planning. She has a BS from Worcester Polytechnic Institute and an MBA from Boston University and she is a Certified Financial Planner.

Jamie Downey has been an accountant for more than 14 years. He's a partner at Downey & Co. in Braintree. Prior to joining the firm, he served as a manager in the audit department of accounting firm KPMG.