Is the Interest Rate
Low Enough to Save You Money?
Talk to some lenders to determine the
available rates and the costs associated with refinancing. These costs include appraisals,
attorney's fees, and points. Then determine what your new payment would be if you
refinanced. You can estimate how long it will take to recover the costs of refinancing by
dividing your closing costs by the difference between your new and old payments (your
monthly savings). However, the ultimate amount you may save depends on many factors,
including your total refinancing costs, whether you sell your home in the near future, and
the effects of refinancing on your taxes. The old rule of thumb used to be that you
shouldn't refinance unless the new interest rate is at least two percentage points lower.
However, many lenders are now offering zero point loans and low-cost refinancing.
Therefore, even if your rate change is less than one percentage point, you may be able to
save some money by refinancing.