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Refinance Considerations
The Basics
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Refinance Considerations
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When you're making your decision, there are several things in mind.
First, even a small rate cut can pay off quickly. That's because
you can easily find mortgage companies willing to waive routine
refinancing charges such as application, appraisal and legal fees
(which can add up to $1,500 to $3,000). Of course, in exchange for
low or no up-front costs, you'll have to be willing to accept a
rate that's somewhat higher than the prevailing rock bottom.
Second, if you are planning to stay in your home for at least three
to five years, it may make sense to pay "points" (a point equals
1% of the loan amount) and closing costs to get the lowest available
rate. And third, you can avoid laying out cash and still get a low
rate by adding the points and closing costs to your new mortgage.
Does that mean shouldering a lot of extra debt? Not necessarily.
If you've had your current mortgage for at least three years, you've
probably reduced your balance by several thousand dollars. So you
may be able to tack your closing costs onto your new loan and still
end up with a mortgage that's smaller than your original one --
plus, of course, a lower rate and lower monthly payment.
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