Did you know that rates and closing costs are up to you?
Seriously! You can choose. Think of a see saw back in the day at recess. On one side is rate and the other side is closing costs. If the rate goes up then closing costs go down and vice versa if rate goes down then closing costs go up.
This is how you see advertised “NO CLOSING COSTS” or some ridiculously low rate that seems lower than anything else.
So, knowing you have this choice, you will want to understand some math calculations, but first you need to ask yourself some questions before you start throwing numbers around:
MONTHLY SAVINGS/CLOSING COSTS
- How long are you going to keep the mortgage?
- What has been your history with changing mortgages or moving homes?
These questions are important because you will need to compare rate and monthly savings to closing costs to see how long it will take to recoup the costs. If you plan on being in the home 3 years or less then I would look hard at doing a low or no closing costs loan with a higher rate (as long as it still is lower than your current rate).
If your plan is to stay in the home and keep the mortgage (because of an incredible low rate) then I would recommend paying the market rate and standard closing costs. Some people like to pay extra to buy down their rate, which isn’t a bad idea, but I, personally, have seen too many people pay extra at closing just to find themselves changing their mortgage by refinancing or moving, because life changes without warnings. So, if a person pays extra upfront on their mortgage then gets rid of it for any reason that upfront cost goes for naught.
Again, it is all your choice, so my recommendation is DO THE MATH. Then apply it to your personal situation and make your own decision.
I look forward to running numbers with you sometime. Cal anytime, even just to see if it might be time for you to do something.