“Interest rates have bounced around historical lows for years, yet a surprising number of homeowners who could benefit from a refinancing still haven’t taken advantage of the potential cost savings.”
In this article, Marine Cole points out some surprising facts about interest rates and the reasons why people don’t refinance their homes. According to Ms. Cole and other experts, some people are simply unaware of their current rate or don’t have the get-up-and gumption to refinance. Other factors include procrastination, mistrust, and the inability to understand complex decisions may also be barriers to refinancing.
The article also points out that the decision to refinance could result in thousands of dollars in savings for the homeowner. For example, refinancing a 30-year, $200,000 mortgage from 6.5 percent to a current rate of 3.35 percent will save approximately $130,000 in interest payments over the life of the loan.
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Teaching Suggestions
You may want to use the information in this blog post and the original article to
- Stress the importance of making sound financial decisions not only when buying or refinancing a home, but other aspects of your financial life.
- Discuss the reasons mentioned in this article that describe why people would not refinance and take advantage of lower interest rates for buying or refinancing a home.
Discussion Questions
- How important is comparing interest rates when either purchasing a home or refinancing an existing home mortgage?
- According to this article, there are many reasons why people don’t refinance their home. If you were refinancing a home mortgage, what would be your major obstacle to refinancing an existing home mortgage? How could you overcome this obstacle?
- Assuming you had a chance to refinance your home and save $100,000 over the life of the loan, would you refinance? Explain the factors that would influence your decision.
Melissa Hart
Focus on Personal Finance, 7e 