Should You Refinance Your Mortgage

The interest rates for mortgages are at an all time low, and are looking like staying there. Should you refinance your mortgage at this lower rate, even though you refinanced not too long ago? The rates were low then too, but now the rate is even more attractive. In fact, mortgage rates are the lowest they’ve been in 50 years. It is quite tempting to refinance and save on the interest.  A good rule of thumb is that you should stay in your home for at least two or three years before refinancing, which gives you time to earn back the refinancing costs.

Some adjustable rate mortgages are attractive to homeowners because they carry less interest for a number of years than a 30 year fixed rate mortgage. On the other hand, if you have an adjustable rate mortgage, refinancing to a low 30 year fixed rate is an excellent idea. That’s because an adjustable rate mortgage can take you by surprise if, for example, you ever lose your job. When the adjustable rate mortgage kicks in, your mortgage payments will skyrocket, and squeeze you financially just when you need it least. Should you refinance is not a decision to make lightly. The current mortgage crisis came about because so many people refinanced their mortgage and took out the equity in their homes to use for other expenses.

That caused the current mortgage crisis of so many homes being underwater, or worth less than the mortgaged amount. That is why you must think carefully about whether should you refinance your mortgage or not.

The chances are you should NOT refinance again if you have already done so recently. Even though the average homeowner refinances their mortgage every four years, when you factor in the closing costs for the newly refinanced mortgage you may actually be losing money if you aren’t able to reduce your interest rate considerably, making refinancing a very poor decision.

Every time you refinance your mortgage, you must determine what the closing costs would be and whether it makes economic sense to refinance. The costs of a refinancing can bring your mortgage payments well over what you are currently paying. Don’t forget to factor in the taxes and other costs of the new loan. Refinancing doesn’t come without a price: closing costs will eat into your savings at first, so the longer you plan to stay in your home, the more you’ll benefit.

Important Points: Should you refinance depends entirely on whether you comparison shop the interest rates of various lenders. Make sure the lender isn’t taking advantage of low interest rates by suddenly raising their closing costs.

Never work with cold telephone callers. A better idea is to ask the bank that currently holds your mortgage what their closing costs are. They may give you a good price just to keep your business.

Also, avoid paying points when you refinance, which is where you pay a slightly higher interest rate instead of paying other loan fees, as you usually won’t get a good deal.

Don’t wait for interest rates to hit their lowest point. If you do your research thoroughly, and the numbers make sense for you, go for it!

Should you refinance your mortgage? Follow some of this refinancing advice and you will be able to answer this question and make wise financial decisions for your future.