With mortgage rates dropping, should you refinance? 'It could be worth it,' says financial planner

Annual percentage rates for 30-year fixed-rate mortgages have slid amid fears of a slowing economy, dropping to an average of 6.52% as of Tuesday,"If you can refinance your rate to be at least 1% lower than it currently is, it could be worth it," says Dean Tsantes,. A rate reduction of 1% or 2% is usually when you start to see a significant reduction in monthly payments, typically a hundred bucks or more on a $300,000 loan.

First is the break-even point, which is the time it takes for the savings from a lower rate to offset the upfront costs of closing a new mortgage, which is typically about 1% to 2% of the loan amount. In the case of a $300,000 mortgage, that's around $5,000. Of course, with refinancing you'll want to scrutinize the terms of the new agreement to ensure that there are no surprises. These could include prepayment penalties, unexpected fees or changes to the amortization schedule for your payments.major forecasts expect rates to continue to decrease further

"As I always tell my clients, I'm a planner, not a psychic, so I don't try to time the market," says Secco. "I wouldn't let the current rate hold you back from purchasing a home or making major decisions — rates shouldn't be the main obstacle."

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