Question:

I have a 30 year fixed 5.875% APR loan. At what APR is it worthwhile to refinance?

Answer:

One other thing to consider would be what your ultimate goal is.  If you are simply trying to reduce your monthly payment with no consideration of long term cost, then refinancing and reducing your payment may be a benefit.

Especially at your interest rate, many times it doesn’t make long term sense to refinance if you’ve had that loan for longer than a few years.  By ‘resetting’ and re-amortizing your loan, the cost will be considerable over the long term.

Remember when you first received your loan statement and almost all of your payment went to interest?  Well, if you’ve had your loan for a few years, that number has begun to skew toward the principle side paying more and more toward reducing the loan each month.

By refinancing, you are tipping that scale back to a mostly interest packed payment which will not benefit you in the long run.  It’s something to consider and most loan officers fail to address this because it means they don’t make a commission!

Hope that helps in your decision making process