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If
you are a homeowner who was lucky enough to buy when
mortgage rates were low, you may have no interest in
refinancing your present loan. But perhaps you bought
your home when rates were higher. Or perhaps you have
an adjustable-rate loan and would like to obtain different
terms.
If you do refinance, the process will remind you of
what you went through in obtaining the original mortgage.
That's because, in reality, refinancing a mortgage is
simply taking out a new mortgage. You will encounter
many of the same procedures-and the same types of costs-the
second time around.
How Would You Know if Refinancing Is Worth It?
Refinancing can be worthwhile for many people, but it
is not in everyones best interest. A general role of
thumb is that refinancing becomes worthwhile if the
current interest rate on your mortgage is at least 2
percentage points higher than the prevailing market
rate. This interest rate difference is generally accepted
as the safe margin when balancing the costs of refinancing
a mortgage loan against the savings to bring you. Other
considerations, such as how long you plan to stay in
the house. Most experts say that it takes at least three
years to realize fully the savings from a lower interest
rate, given the costs of the refinancing. Depending
on your loan amount and your specific situation. However,
you might choose to refinance a loan that is only 1.5
percentage points higher than the current rate. You
may even find you could regain the costs in a shorter
time.
www.pueblo.gsa.gov
Online information resources for good decisionmaking.
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