Savings Add Up, Especially Over Time

With the fluctuating economy, mortgage rates have been near historic lows. Depending on when you purchased your home, what your mortgage interest rate is, what your home's value is and other financial considerations, it may be the right time to refinance.

When choosing to refinance, there are many things to consider besides the new loan's interest rate and monthly mortgage payment. Yes, savings are important, but be sure to examine your situation closely before refinancing.

Think about these things as you consider refinancing:

How long will you own and live in the home? If you plan to stay in your home for the long term, it may make sense to refinance. If you are uncertain, plan on renting out your home or know you will be selling shortly, give us a call to discuss the pros and cons.


Do you need cash out of your equity to remodel your home? If you have paid down a good portion of your mortgage and/or your home value has increased, investigate whether a cash-out loan is right for you.


Do you want to pay off another loan (education, auto, credit card, etc.) with equity from your home? Consolidating debt could bring the added benefit of a tax deduction for interest paid. Weigh the options of financing your extra debt for the long term with equity from your home.


What type of loan is it, and what is the term? Fixed-rate loans offer attractive rates. It may be a good time to switch from an adjustable-rate mortgage (ARM) and lock-in to a known rate and a fixed monthly mortgage amount. If you have been paying down your home for quite some time, you may be interested in a shorter-term loan such as a 15- or 10-year mortgage instead of the common 30-year variety.


What fees are required at closing? Request and examine the truth-in-lending statement and good faith estimate. Understand each fee and be sure to ask questions if anything is unclear. Remember, refinancing can save you money -- if you're in the right situation.