When is it a good idea to refinance? This guide will go over some of the things you need to know when trying to decide whether or not to refinance your mortgage.
Usually, you should know how much interest you're paying on your mortgage. When interest rates start to go down, you need to be ready to take advantage of the lower rate. Refinancing usually costs a few thousand dollars, so you should think about a number of things before deciding whether or not to do it.
First of all, how much are you already paying? You need to know how much you save each month and how long you plan to stay. Only refinance if you're sure that you will be staying in that house for awhile - moving and selling your house would wipe out all the benefit of refinancing. You should also consider whether or not interest rates will go down in the future. You don't want to rush into refinancing only to find out a few months later that interest rates have dropped a point. Over the life of your loan, even a small change in interest rates can lead to a big gain, so you want to make sure you refinance at the lowest point. Talk to your bank loan officer - they'll generally tell you whether they think it's a good idea and what direction they think interest rates will be going. Ask them to show you exactly how they did the math, and then check it yourself.
