By Mike Miles
Let me start today’s post by saying congratulations to the Kansas City Chiefs. Many people probably don’t realize that the championship drought of the Chiefs is longer than the drought experienced by the Kansas City Royals. The Chiefs obviously have had numerous playoff runs during that time … so the drought isn’t quite as magnified. The 2018 Chiefs weren’t expected to be this good. It was supposed to be a rebuilding year with a new quarterback … and look what happened. We all saw something amazing unfold all year long. We nearly beat the Patriots and Mahomes didn’t even get to touch the ball in OT. The ending, while sad, doesn’t seem final. Instead it seems like the beginning and feels a lot like the 2014 Royals.
The game this past Sunday was a classic, and we were all witness to how finite the game actually is. Did the ball skim Edleman’s fingers? How far over the line of scrimmage was Dee Ford? How many teeth does Tom Brady have? That last question isn’t serious, but I mean … doesn’t it seem like he has about 10 extra teeth?
The mortgage industry has plenty of situations in which a relatively small number makes a big impact. Let’s look at a change of interest rates. The recent drop in rates will most likely result in a jump in refinance applications … and for good reason. More and more people are understanding that even a small rate reduction has a long-lasting benefit of reduced payments.
Every .125 percent rate decrease per $100,000 financed is about $8 per month of reduced payments on a 30-year mortgage. Seems paltry I know. However, adjust that number by multiplying it by the number of .125 percent increments and adjust for the number of hundreds of thousands financed … and the number becomes substantial pretty quickly.
Let’s say you have the opportunity to reduce your rate by .5 percent. That’s a multiple of four of the .125. Let’s also say you have a loan amount of $300,000, which is a multiple of three of the amounts financed. This rate reduction would result in a savings of approximately $90 per month. Add this amount over the life of the loan and it’s about $32,000 in saved interest. Or you could pay the savings back into the loan and reduce the loan balance by about one payment each year.
Many homeowners shrug at the idea of refinancing and end up losing a lot of benefits by procrastinating. Don’t wait for some larger rate decrease. It may not happen.
This weekly Sponsored Column is written by Mike Miles of Fountain Mortgage. Located in Prairie Village, Fountain Mortgage is dedicated to educating, and thus empowering, clients to make the best financial decision possible for their situation. Contact Fountain today.
Mike Miles NMLS ID: 265927; Fountain Mortgage NMLS: 1138268