Monitor your portfolio: when to refinance

HARTFORD, Conn. (WFSB) – Owning a home is part of the American dream, but that dream becomes more expensive when interest rates are high. When the Federal Reserve announced last week that it was cutting its benchmark interest rate by half a point, it meant that borrowing money to buy a home now costs less.

If you’re already stuck on a mortgage, you may want to consider refinancing.

David Adamo is the CEO of Luxury Mortgage, a mortgage banking company based in Connecticut.

“The advice I usually give is if it’s a big enough saving for you, then do it. And what might be a big enough savings for one person versus another might be a little different depending on their budget and financial situation,” Adamo said.

Adamo says that while everyone’s situation is different, one formula to consider is:

Calculate how much you would save each month on your mortgage payment if you refinanced. Then multiply those savings by 12. If what you would save over a year is enough to cover the closing costs associated with refinancing, it’s worth it.

“Beyond that, it depends more on each individual’s financial situation and what is important to them,” Adamo said.

Closing costs also vary, but Adamo says they average about 1% of the loan amount. Adamo says to also consider the cost of your time. He says on average it will take about 3 to 5 hours to gather the necessary documents for refinancing. You will then spend a few more hours on closing day.