By: Mary E. McCraw, CFP®

With interest rates at historic lows, it is an excellent opportunity to lock in a low rate on your mortgage. However, many people simply don’t take advantage of this strategy to reduce their mortgage costs. Below are a few reasons we have heard for not moving forward with refinancing:

• High Upfront Costs – While it is true that many lenders charge 1% or more to complete a refinancing, the savings in monthly interest cost can quickly recoup these costs. You simply need an estimate of the total costs and the new loan rate to calculate how long it will take to recoup those costs. Also, at least in Little Rock, there are local banks offering low-cost and even no-cost refinancing. It is worth asking around to see if any of these options are available in your area.
• Low Appraisals – Of course, low appraisals can be a sticking point in the current real estate market. While 20% equity is required for the best rates and terms, there are options for refinancing with as little as 5% equity. If your current mortgage has an adjustable rate and you need to lock-in to a fixed rate, it may be worth looking into these options even with less than 20% equity. Of course, the closer you can get to 20% equity, the more options will be available.
• Hassle Factor – Many people have had a horrible experience refinancing with one of the big banks, often through an online or phone process. In our experience, it is possible for refinancing to be a painless process. Often, local banks are willing to go above and beyond to minimize the hassle factor.

If you are approaching retirement in the next 10 to 15 years, now is an excellent time to refinance and match your mortgage pay-off date to your retirement date.

Don’t let the reasons above scare you off from potentially large savings over the life of your mortgage.

®2013 The Arkansas Financial Group, Inc., All Rights Reserved

IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by The Arkansas Financial Group, Inc.-“AFG”), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from AFG. Please remember that if you are a AFG client, it remains your responsibility to advise AFG, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. AFG is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the AFG’s current written disclosure Brochure discussing our advisory services and fees is available for review upon request. Please Note: AFG does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to AFG’s web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.