Should We Refinance?

Most consumers are fairly savvy about saving money; however, many continue to pay monthly mortgage payments with interest rates that are 1%, 2% or even 3% higher than what may be currently available. For example, the difference in payments between a $250,000 mortgage at 4.5% and at 6.5% amounts to $313.46 per month, or $3,761.52 per year.

Before you decide to refinance your house, there are a few questions you will need to answer. By looking at your current situation you will be able to make a more informed decision as to which is more beneficial: refinancing or maintaining your current mortgage.

Ask questions:

1) What is your current interest rate?
2) What is the current market interest rate?
3) Is the rate fixed?
4) How long do you plan to stay in this home?
5) Do you have cash available for the closing costs?
6) Is the value of your home increasing, decreasing, or staying about the same? What are the short term and long term prospects for the value of your house?

Analyze your answers:

1) If the difference between your current mortgage rate and what is available is more than 1 point, it may be worth it to refinance. If the difference is less, it may not make sense to refinance.
2) Get a quote from a licensed loan officer in your state for the most accurate rates.
3) If you have an adjustable rate and the current market interest rate is the same or lower, it may be advantageous to refinance your house.
4) If you plan on staying in your current house for more than three years, it may make sense to refinance if you can significantly lower your rate and payment. If you will be moving in less than three years, it will probably be better to stay with your current loan.
5) You may need some cash for closing but not always. Ask about "no-cost refinances to minimize your out-of-pocket expenses.
6) If the value of your home is staying the same or increasing you may be able to increase your equity more quickly with a lower interest rate.

Interest rates are bordering all time lows, so once you have done your homework, the rest is easy. Find a trusted lender to work with and explore the programs that suit your needs. There is no reason to continue paying high interest rates.
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