When Is It Time to Refinance?

When Is It Time to Refinance?
You've heard that interest rates are at an "all time low"
and you figure that's a good indication that you should
refinance your existing mortgage. You may be right, but
there are some things you need to consider before you
decide to start the refinance process.

The first thing you need to know is the interest rate on
your existing mortgage. Compare that with the interest rate
you can expect to get if you should refinance. If there's
not at least one and a half to two points difference,
you're probably not going to better yourself by seeking a
refinance loan. There are going to be closing costs
associated with refinancing, possibly including an
appraisal and fees for closing your existing loan early. If
your new interest rate is only marginally better, it will
take you a long time to recover the cost of taking out a
new loan.

Another thing to consider before you decide that it's time
to refinance is your future plans. If you plan to only stay
in the house another year or so, you're probably not going
to be better off with a new loan. If, for example, you
expect your job to require a move or you plan to sell your
house soon for the equity you've accrued, you won't likely
recoup the cost of closing a new loan.

Does this mean that there's never a time when refinancing
is a good option? Not at all. In fact, there are some times
when a refinance loan is an excellent financial move. Maybe
you took out your original loan when your credit score was
low and the only way you could get a loan was to accept a
high interest rate. That's sometimes the case with first
time buyers, but you might have increased your credit score
if you've made regular payments for a couple of years. In
that case, it could very well be time to refinance. You
could get a much better rate and find yourself building
equity much more quickly than with your current loan.

You could also be saddled with a less-than-ideal loan
because of poor credit or market conditions at the time you
took out your loan. If you are currently financed at a
variable interest rate, you may simply want the security of
knowing the exact amount your mortgage payments will be
each month. In those cases, it could be time to refinance.

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Debbie Groves is the owner and operator of Mortgage
Refinancing People, Inc. which is a premier resource for
refinancing information. For more information, please visit
http://www.mortgagerefinancingpeople.com