With Rates Low, It Makes Sense To Refinance Now, Pocket Savings
Q Now that interest rates are quite low, we have been exploring the idea of refinancing our 7.5 percent mortgage. Are there costs associated with refinancing? Is there a formula that tells us whether refinancing makes sense?</br></br>A In recent years, many homeowners have made refinancing almost an annual ritual. Interest rates, which are near an all-time low, have been steadily dropping, and consumers have taken advantage of these lower rates.</br></br>There are some costs, though, just as there were when you obtained your original mortgage. The only differences between a purchase and a refinance are that there is no buyer or seller present at closing, and no real estate broker is involved.</br></br>Your refinance lender, even if it is the same lender who holds your current loan, has to start from scratch. The lender must obtain current financial information about you, contract for an updated appraisal of the property and receive an updated title report. Just because everything was acceptable several years ago when you obtained your mortgage does not mean that everything is acceptable today.</br></br>You should shop around. Contact several mortgage lenders and brokers to determine what interest rates you can obtain. Determine what the various rates will be for a fixed 30-year mortgage, and compare those rates with a fixed 15-year mortgage as well as with an adjustable-rate mortgage.