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Money Myth: Refinancing Will Always Save You Money

Fact or Myth: If I refinance my house at a lower rate, I’m saving money”

MYTH

When you refinance your house at a lower interest rate, you will likely pay smaller monthly payments, but this does not mean you will be saving money. The problem that arises here is that most people that refinance do so for a 30 year term again. That means that if you had previously paid 5 years toward your mortgage before the refinance, you have extended the previous 30 year loan to 35 years. Since the first years of the loan are when you are paying almost all interest, even with the lower interest rate and lower monthly payments, you'll likely pay more over the long term. –Thomas Meyer, Chairman & CEO of Meyer Capital Group

Treat your mortgage as a tool and only utilize it when it makes sense to do so. And don’t forget about fees and closing costs associated with a new mortgage. -Tim Maurer, director of financial planner for The Financial Consulate