Interest rates are always changing.  Inflation and other economic events (like the recent Brexit) can have a significant impact on interest rates.  Recently, interest rates have dropped dramatically.  This is great news for anyone looking to purchase a new property or refinance an existing loan.  For now, we will focus on refinancing.  What impact can that change in interest rates have on you?

Let’s look at an example and crunch some numbers.  Assume you have a $200,000 loan at 4.25% interest.  The principal and interest portion of your payment would be $983 per month…originally $275 allocated to principal and $708 to interest.  Under this scenario, you will pay $154,196 interest over life of loan.

Now let’s assume you can improve that rate by 0.5%.  How much of a difference will it make?  That same $200,000 at 3.75% results in a monthly principal and interest payment of $926…$301 towards principal and $625 towards interest.  That savings of $57 per month might not seem like a big deal, but it has a huge impact.  Not only are you saving $57 per month on your total payment, but more of the new lower payment is being allocated to principal…$26 to be exact.  That is a net monthly savings of $83.  And that monthly savings really adds up over the life of the loan.  The total interest due drops by over $20,000 to $133,443.

The bottom line is that what may appear to be minimal savings on a monthly basis can make a huge difference when compounded over time.  I would love to help you start saving money now.  Call or email to find out how much you can save on a refinance.

Matthew Goldberg | Loan Officer | Primary Residential Mortgage Inc. 

P: 480-787-2233 | mgoldberg@primeres.com | NMLS # 1342195 | AZ LO-0930826

9280 S Kyrene Rd #134 |Tempe, Arizona 85284 | NMLS # 3094 | MB-0902614