Current interest rate is about 1.5% per year, but yet some of us could be paying as high as 3.75% per year
Imaging you have $100k owing to the bank with loan tenure of 20 years remain, and now paying 3.75% and you refinance to 1.5% per year for 3 years,
Interest saving for year 1: $2,221.18
year 2: $2,155.84
year 3: $2,086.50
Total for 3 years: $6,463.52
If outstanding loan is $1million, expect an saving of about $64K for 3 years!!! That is not a small amount!!
2. Refinancing with lower interest rate reduces the principle amount outstanding faster
Continuing from the previous example,
Without refinancing: $89,333.94
With refinancing: $86,842.77
By the end of the 3rd year, you would also owe $2,491.17 less to the bank
And the more is your outstanding loan, the benefit you attain with refinancing.
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