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Financial & Estate Planning

Refinancing: Your Personal “Economic Stimulus” Package?

Refinancing:
Your Personal “Economic Stimulus” Package?

In our 40+ years as wealth advisors, we’ve heard the question many times. Should I refinance? The reasons vary, but it typically comes down to saving more or getting out of debt sooner. Either way, our clients envision a better lifestyle and less stress as more cash becomes available for important goals like retirement funding, college savings for children, or living debt free. Of course, it can also be as simple as our clients spending some newfound cash on the things they enjoy. Your reason might be something different still. Whatever the reason, the extra cash is a pleasant shutterstock_14174845surprise.

So, is it really worth the trouble? Typically, the monthly savings as a result of refinancing is a few hundred dollars. That doesn’t sound like much, but compounded over many years, the savings can really add up. A simple example may help. Imagine refinancing a $300,000, 30-year mortgage and lowering the interest rate from 4.5 percent to 3.5 percent. The savings is about $173 per month. Invest that savings and you could grow your investments to about $250,000 over 30-years. The mortgage is paid off and you have an extra account that’s almost as large as the original mortgage itself. Not too bad!

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