Watching your Wallet: When to refinance

Well, after several years of these high interest rates, there's now been a dramatic shift in the other direction. So does it mean it's a good time to refinance your mortgage? In this Watching Your Wallet, Channel 3's consumer reporter Cassidy Williams breaks down what you should consider before refinancing. Owning a home is part of the American dream, but that dream becomes more expensive the higher the interest rates. So when the Federal Reserve last week announced it was cutting back the benchmark interest rate by a half point, it means borrowing money to buy a home is now less expensive. And if you are already locked into a mortgage, you can consider refinancing. The guidance I usually give is that if it's a significant enough savings for you, then do it. And what might be a significant enough savings for one person as compared to another person could be a bit different based on their budget and their financial situation. David Adamo is the CEO of Luxury Mortgage, a mortgage banking firm based in Connecticut. He says, while everyone's situation is different, a formula to consider is this. Calculate how much you'd save each month on your mortgage payment if you refinanced, then multiply that savings by 12. If what you'd save over the course of one year is enough to cover the closing costs associated with refinancing, it's worth it. But beyond that, it really is more based on each individual's financial situation and what's significant to them. The closing costs vary too, but Adamo says they are on average around 1% of the loan amount. The other thing to consider is the cost of your time. Adamo says it will take around 3-5 hours to gather the paperwork needed to refinance. You will then spend another couple of hours the day of the closing. Cassidy Williams, Channel three Eyewitness News.