Is 3.625% < 5.125%?

Is 3.625% < 5.125%? With mortgage rates inching down this past year, I decided it would be a good time to refinance my homestead and two of my rental properties. Wise because the loan averages in Freddie Mac’s Primary Mortgage Market Survey showed mortgage rates have not been this low since 1950s. While I’d prefer to spend time working on my tennis backhand, the time spent applying for and completing the refinancing of 3 properties offered a better payback. When I refinanced my homestead and one rental property, each had 20 years remaining on the mortgage note. Now I wanted to refinance my Vail, Colorado property. My plan was to refinance out of my existing 5.125%, 15-year note to a 3.625% 15-year note. The former carried a monthly payment of $1,475 and a loan balance of $127,000. Refinancing at 3.625 would result in a monthly payment of $930 and a new loan balance of $129,000 - a monthly savings of $545 per month. But was it a savings and is 3.625% lower than 5.125%? The answer is maybe and maybe. (At this writing the 30 year mortgage rate is 3.75%; the 15 year is 3.25% and the 7 year ARM is 2.875%). I had 9 years remaining on my existing 5.125% mortgage. The new mortgage, with the lower rate and lower monthly payment, was extending my loan to 15 years. In this instance 3.625% was not lower than 5.125% if I compared the loan balances 5 years out from the date I closed on the refinancing. Had I kept my original loan, at the end of 5 years (2016), I would have owed $62,691. With my new loan (3.625%) my balance at the end of 2016 will be $93,506. I note this for two reasons. The first is that not all things are not what they appear to be - Bernie Madoff, the Dutch Tulip Bubble - and secondly it is important to do your homework before making financial decisions whether investing or buying a home. I know real estate so many people choose to use the services of Homebuyer Associates to buy a home. They ask real estate and financing (and rehab) questions before they buy and many years after. I understand the use of money but when I encounter a question beyond my abilities I ask someone who is smarter than me regarding investing. This way I get the answer to a question and I learn something at the same time. The mortgage lender never raised the question of whether I should be refinancing nor is it his responsibility to do so. It is my responsibility to learn and understand how my money is spent and invested. On reflection I had options and chose options that are going to require discipline. I am disciplined but I’m also human. So was my refinancing a mistake? I’ll explain that in part 2 later this month. Is it time for you to refinance? You might find this link helpful - http://zwicke.nber.org/refinance/ If you found this information of interest please share it with a friend. If you are a past client, thanks. If I can be of assistance to you, your family or friends I would welcome the referral. As always, if you have a real estate related question (including rehab) feel free to contact me. Thanks for reading