Weighing the Options of Refinancing

Some have said that only in the case your new interest rate is at least 2 points below your current rate, should you refinance your loan. Maybe several years ago that was sage advice, but no longer. A refinance may be worth its cost many times over.

Advantages

You may be able to bring down your interest rate and reduce your mortgage payment substantially. You could also "cash out" some of your equity, which you can use to consolidate debts, improve your home, or plan a vacation. You may want to consider building equity faster by switching to a shorter term loan.

Expenses and Fees

As you probably know, there are fees associated with refinancing. When you refinance, you're paying for many of the same things you paid for when you got your current mortgage loan. These could include settlement costs, an appraisal, lender's title insurance, underwriting fees, and so on.