Interest rates are so low it might be worth it to refinance your mortgage, but there are some things you need to be sure of before you decide.
Q: I’m paying $1,650 a month on my mortgage with a fixed interest rate over 6%. I’ve been thinking about refinancing my home, should I?
Interest rates are low right now, so that makes refinancing attractive, but there are a couple of things that you’ll want to find out before you decide. Let’s assume that you’re planning on staying in the house for a while longer, because if you’re just planning it sell it in a year or two, then refinancing isn’t worth it.
There are a few reasons why you would want to refinance in the first place: lower interest rate, cut down on the term of the loan, lowering monthly payments or switching to a fixed rate. But, even if the purpose of refinancing is for the lower payments, you’ll be paying closing costs. After all, refinancing your mortgage means you’re starting over with a new loan (which pays off the old loan).
But if you’re looking to refinance you have to calculate your break-even point, that way you’ll know if you’re saving money. There are a number of online calculators that can help you figure out if it pays to refinance. CNN Money’s calculator allows you to compare three loan options, Bankrate.com has a rather in depth calculator and Lending Tree has multiple calculators.