Weighing the Options of Refinancing

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Ever hear the pearl of wisdom that says you should only consider refinancing if the new interest rate is at least two points below your present rate? Perhaps several years ago that was wise advice, but since refinance costs have been getting lower, it may be a good time to take a serious look. Refinancing has some advantages that can make it worth the initial cost a few times over.

Benefits from Refinancing

When you refinance, you could have the ability to lower your interest rate and monthly payment amount, sometimes significantly. You might also be able to "cash out" a portion of your equity, which you can use to take care of higher interest debt, improve your home, or take a vacation. With reduced interest rates, you might also get the chance to build up home equity more quickly by moving to a shorter-term mortgage loan.

Fees and Expenses

Of course, you'll have some fees and expenses during your the refinance process. With your refinance, you are paying for a lot of the same things you were charged for when you obtained your current mortgage loan. Among these can be settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.