When you're making your decision, there are several
things in mind.
Once Then Do It Again
When rates fall steadily, refinancing may make sense even if you have done so once already.
Bob and Michelle Barbo of Kirkland, Wash. refinanced twice within three months in 1998.
Build Home Equity Faster
Many borrowers use a refinance to shorten the term of the mortgage. And brace yourself:
Even at low rates, a shorter term means a higher monthly payment. The benefit is that you'll build
up equity faster and pay far less in total interest over the life of the loan.
Your Hands on Some Cash
Another way to make a refinance work for you is to
refinance for more than the balance remaining on your
old mortgage -- in effect, tapping your home equity,
or "cashing out," in mortgage speak.
Your ARM For a Fixed Rate
By switching to a fixed-rate loan, you will not
only reduce your payment, you will also likely lock
in an attractive rate for as long as you own your
When you refinance your mortgage, you usually
pay off your original mortgage and sign a new
loan. With a new loan, you again pay most of the
same costs you paid to get your original mortgage.
Check the market closely to determine the available
rates and the costs associated with refinancing.
These costs can include items such as an appraisal
and other various fees and points.
Points For a Lower Rate
In refinancing, a mortgage company usually offers
a range of interest rates at different amounts
of points. A point equals one percent of the loan
amount. For example, three points on a $100,000
mortgage loan would add $3,000 to the refinancing
Personal Income Taxes
With a lower interest rate on your home loan,
you will have less interest to deduct on your
income tax return. That, of course, may increase
your tax payments and decrease the total savings
you might obtain from a new, lower-interest mortgage.
Other Mortgage Programs
If you are thinking about refinancing your mortgage,
you might want to consider other types of mortgages.
For example, you might want to look into a 15-year,
Traditionally, the decision on whether or not
to refinance has meant balancing the savings of
a lower monthly payment against the costs of refinancing.
But in recent years, companies have introduced
"no cost" and low-cost refinancing packages
that minimize ...