Should I Refinance My Mortgage

If you have paid any attention to the global economy over the past couple of years, then you probably know how low interest rates have been. This includes refinance rates, which have been knocked down to all-time lows. If you are a current homeowner, then I am sure you have asked this question at some point over the past 2 years - Should I Refinance My Mortgage?

That can be a tough personal finance question and one that differs from homeowner to homeowner. In some cases, a home loan refinance could reduce a monthly mortgage payment by a couple hundred dollars. Another mortgage refinance option could shorten the length of your loan, thus reducing the overall costs of owning your home.

There can also be times when a refinance does not make any sense and could end up costing the homeowner more over time. Since there is no such thing as a zero cost refinance, the homeowner will be required to pay closing costs at some point in the process. These extra expenses may run end up costing too much, which can make refinancing your mortgage less attractive.

Here are a few questions to ask yourself if you are wondering - should I refinance my mortgage . After you start thinking about your existing mortgage, closing costs, potential savings, and new loan details - it should be easier to tell if refinancing is right for you.

• What are your current mortgage details? - This information can make it easy to tell if you should refinance your mortgage. For example, a homeowner with fewer than 5 or 10 years to pay on their mortgage would probably not benefit from refinancing. There are other cases when your existing interest rate is competitive with current rates. It may not be worth the effort to refinance and pay extra closing costs just for a slightly lower rate.
• How long do you plan to live in the home? - If you are thinking of moving anytime in the next couple of years, then refinancing your home is probably not for you. It generally takes several years to break-even on the closing costs of a refinance compared to your monthly cost savings. If you are not living in the home long enough to cover all closing costs, there is little reason to refinance.
• How long will it take to break-even on the loan? - As stated earlier, a homeowner will be responsible for paying some closing costs when they refinance. If the closing costs run $2,400 and you are saving $100 per month from the new loan, it will take you 2 years to break-even ($2,400 /$100 or 24 months). For homeowners who plan to remain in the home for at least two years, refinancing would begin to pay off in month 25. A homeowner looking to sell in less than 24 months will never recoup the total costs of the loan.
• What are your mortgage refinance options? - What is your goal from refinancing? Are you planning on cutting your monthly mortgage payment? Maybe you are looking to shorten your loan by refinancing from a 30 year mortgage to a 15 year. Or you could decide that you need to apply for a cash out refinance in order to pay some medical bills or college tuition. No matter your intentions for refinancing your home, it is important to have a plan. Each refinance is different, which is why it is critical to fully understand your plans.
• What is the current market value of your home? - Having an idea about the market value of your home will help answer the question of - Should I Refinance My Mortgage?  If you have purchased your home over the past couple of years, there is a good chance the home is not worth as much now as when you bought it. In many cases, homeowners are surprised to find out that they no longer have 20% equity in their home, even though they made a 20% down payment. Most banks will charge PMI (private mortgage insurance) for homeowners without 20% equity. If your home has decreased a lot in value, it may be wise to avoid a refinance to avoid PMI.

Should I refinance my mortgage? This is a popular question being asked by a lot of homeowners in today's housing market crisis. With interest rates at historic lows, there may never be a better opportunity to take advantage of the struggling economy and refinance your home.

Before you get too far into the process of refinancing your mortgage, make sure you answer the questions listed above. These should help guide you down the path of a home loan refinance.

Have you tried to refinance recently to try and take advantage of low mortgage rates?