To Refinance or Not to Refinance-Help!!!
Does it make sense to refinance based on the circumstances below? My husband and I are debating on this issue. What do you think?
Here are the facts:
* We puchased our house for $168,000 6 years ago at 7% interest rate, 30 yrs
* Our montly payment at that time was in the low $1400s.
* We refinanced 1 year later. Our new balance became 176,000 after refinancing with an interest rate of 6.5%. Our monthly payments was lowered to $1290 but over the years has since gone up to $1392 (insurance and tax increase).
*So to sum up, today our new balance is $156,000 and our monthly payment is now $1392 at 6.5% interest rate
Now, if we refinance,we will have an interest rate of 5% and our payments will be about $1150 a month.
My husband says lets do it because we will now have an extra $150 to $200 each month and a lower interest rate.
I'm concerned because our new balance will go right back up again with another 30 years to pay off the mortgage.
Which is a more beneficial-saving the extra $150 a month with a 1.5% lower interest rate or focusing on lowering the balance of the mortgage?
I'm still a novice at this so any good advice is appreciated!