Interest rates are still at an all time low and the common wisdom is that rates will go up but no one knows when. Yesterday I saw a news segment on TV about what a great time it is to refinance because of the lower interest rates. It is never a great time or the best time for everyone when it comes to refinancing or buying a home. If anyone tells you now is a great time to buy or to refinance without knowing what your situation is . . RUN!
Just because the rates are lower does not mean that it is a good time to refinance. We pay the most interest on our mortgages during the first few years. On a thirty year mortgage that first payment is mostly interest. As time goes on we begin to pay more principal and less interest. When you refinance you start all over again paying a lot of interest but and not paying much on the principle. There are also closing costs to pay on a refinance.
For people like me who are at the tale end of a mortgage that was for a higher rate it doesn’t always make sense to start all over paying all of that interest. My own mortgage payments are mostly on the principle, I already paid most of the interest and for me there is no advantage to refinancing unless it is to a loan with zero interest.