Should You Refinance Your Mortgage?

Is Mortgage Refinancing Worth It?

The answer depends on how much money you''re going to save over the long term, as compared with your up-front costs for refinancing your home loan. Generally speaking, if the mortgage interest rate on your current home mortgage loan is at least two percentage points higher than the current market interest rate, you''re a good candidate for home refinancing.

You should also think about how long you plan to stay in your home. If you''re going to be leaving in a year then it''s extremely unlikely that it will be worth it to refinance your home loan. You generally need to be in your house for at least an additional three years in order to have the costs of mortgage refinancing recouped by savings on your mortgage payments.

Additional reasons to refinance your home include the obvious reason of saving money, to build up equity in your house in order to have that money available down the road for a big-ticket purchase, or for your children''s education. Or, you may have an adjustable rate mortgage (ARM) and you''re uncomfortable not knowing exactly what your mortgage payments will be in the future. All of these reasons are motivation enough to switch to a fixed rate mortgage loan.

Alternatively, you might want to stick with an adjustable rate mortgage, but you may have found one with a lower mortgage rate, or with appealing features such as payment caps that are lacking in your current home loan. If you do refinance your ARM, it will in general be because the next interest rate adjustment on your ARM will cause your monthly mortgage payment to shoot up. Again, if you can save 2 or 3 percentage points (because current adjustable rate mortgages are being offered at lower interest rates), then it may well be worth your while.

If you choose not to refinance your home loan, you might still ask your current mortgage lender whether it is feasible to adjust your current mortgage loan in order to have it better serve your needs.

Other Consumer Education information you may also want to read:

• Home Loan Glossary of Terms - Need help understanding mortgage loan financing terminology? This mortgage glossary provides definitions for some of the most common home loan related words and phrases.
• Mortgage Financing Information - Questions you should ask before getting a mortgage loan.
• Mortgages: More Choices, New Risks for Borrowers - Not that long ago your mortgage choices were relatively simple. Now, many new loan products are being widely offered that could benefit some people but be huge mistakes for others.
• Mortgage Calculator - Plug in the numbers and estimate a home mortgage payment using this simple mortgage calculator.

Shop for Related Services:

• Mortgage Refinance Directory - Shop for mortgage related services at DebtConsolidationLoan.com: Mortgage refinancing, home equity loans, debt consolidation, home purchase financing and second mortgages.

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