Should I Refinance My Home

This is a question that I am frequently asked.  How do you decide if you should?  There are several questions that you should asked yourself to help you decide if the time is right for you.

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  1.  The first question is what is the current interest rate on your loan? There is a general rule of thumb that says if interest rates are more than a point lower than what you have it might make sense to refinance.  For example, if the interest rate on your loan is 4 and rates are at 2.75.  You should consider.  You will find your interest rate on your monthly statement.
  2. You find out that interest rates are at least a point less than where you are.  Then what?  I feel you need to asked yourself some more questions.  How long do you intend to own the property? It costs money to refinance.  On average it costs in the range of $2,200 to $3,000.  That number can be higher. With that number in mind, how many months would it take to break even with the money you would save at the lower interest rate?  You certainly want to be able to enjoy the money that you are saving.  Know that most lenders will tack the refinance cost, on to the loan.  So that means that you will owe more on your property once you refinance.
  3. Do you have plans or needs for the money that you will be saving each month?  You might be saving a couple of hundred dollars if you interest rate is more than two percentage points higher than where interest rates are now.  What would you do with that money? 
  4. Another thing to asked yourself is could I shorten the life of my loan?  Could you take your current thirty year, mortgage that you still have 25 years on down to a 20 year or a 15 year loan?  If that is the case it may truly be a good idea to refinance.  Know that your monthly payment will more than likely be higher, but you may be in a better financial situation than you were when you took out your mortgage and that extra amount may not be as significant as it was when you took out your loan originally. IF you cannot, know that you will be starting over with a new thirty year loan.   

After reading this post you may still have questions.  I would like to recommend that you speak with a lender that I trust, Dave Armstrong.  He is with Elevations Credit Union.  He offers great rates and low fees.  He can be reached at dave.armstrong@elevationscu.com or 970-388-3903.