Weighing the Options of Refinancing

Ever hear the pearl of wisdom that states you should only consider refinancing if your new interest rate is at least 2 points below your existing rate? Perhaps several years ago that was wise advice, but as refinance costs have been getting lower, it may be a good time to look into it. Refinancing has a number of benefits that will often make it worth the initial cost a few times over.

Benefits

You may be able to bring down your interest rate (sometimes by a lot) and reduce your mortgage payment amount with a refinanced loan. Additionally, you might be given the option of tapping into the equity in your house by "cashing out" some money to remodel your home, consolidate debt, or plan a special vacation. With lower rates, you might also get the chance to build your home equity more quickly by changing to a shorter-term loan.

Expenses and Fees

All these advantages do come with some expense, though. When you refinance, you're paying for basically the same things you were charged for when you got your current mortgage. These probably include settlement costs, appraisal fees, lender's title insurance, underwriting expenses, and so on.