(WOIO) - Need some extra cash? If you own a home, you may want to consider refinancing. While interest rates have increased slightly since the big drop in 2012, they're still near historic lows. Check out these incredible savings.
Depending on your current financial situation, refinancing could be a smart move. Financial advisor Stuart Welch says it's an option he's been exploring with his clients.
"Both the 15 and the 30-year mortgage rates are near historical lows, and they have recently drifted back down to that level. So that presents an opportunity for people that didn't refinance back in 2012, 2013, to get a second bite of the apple," he said.
The low rates have surprised Welch but he believes falling oil prices have played a role.
"What that's done is lower the cost of lots of goods and services. So what you're seeing is some deflation in prices and that is at least a factor in lower interest rates," Welch said.
Welch says it is hard to predict how long the low rates will stick around, but has this advice for anyone considering it.
"You ought to go ahead and do it. I wouldn't try to get lower rates than they are now because these rates are very, very attractive," he said.
According to Welch, the current interest rate for a 15-year loan is about 2.98 percent. For a 30-year loan it's around 3.79 percent. So how could refinancing translate into saving money?
, here are some numbers. On a $200,000 loan, for example, the monthly payment on a 30-year mortgage with a 4.8 percent interest rate is $1,446. Bring that interest down to the current 3.8 percent and the monthly payment is $1,328. That's a savings of more than $1,400 over one year.
If you think refinancing could be a good option for you, Welch recommends following his rules of thumb.
"If you can cut your interest rate by 1 percent, and you plan to stay at your house for at least five years, then I think it makes sense," he said.
Welch said you need that 1 percent advantage and a minimum of five years in your home to make up for the closing costs associated with refinancing.
Check out the pros and cons of refinancing before you get started.