Should you refinance your home mortgage? That's a question many homeowners are asking,
given the lower mortgage rates that are currently available. But, how do you decide if
refinancing makes sense in your particular case? The answer depends on many factors,
including your tax bracket, the length of time you plan to stay in your home, and the
additional costs and charges you must pay for the refinancing.
Is the Interest Rate Low Enough to Save Money?
The most common reason to 'refi' is to lower your interest rate. Conventional wisdom is to
lower two points, but even one point can make it worthwhile.
How Many Points will my Refinance Cost?
This can vary depending on what interest rate you want to refinance at. If it lower than
market rate, you may have to pay discount points.
How Would Refinancing Affect the Taxes You Owe?
Escrow, or Impounds, can be tricky business when you refinance. You will need to
reestablish your account with the new company and your existing company will refund your
current balance within 30 days.
Should You Also Consider a Different Type of Mortgage?
When refinancing, be sure to look at different programs. Often, it is a good time to get a
shorter term loan with a lower rate that will knock years off the mortgage with little or
no increase in payment.