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Things to Consider When Refinancing
by Brooke Sikula
It is no secret that many people have been taking advantage of the recent record low interest rates to refinance their homes at more favorable rates. There are a number of excellent reasons for refinancing a home, but there are a number of import

It is no secret that many people have been taking advantage of the recent record low interest rates to refinance their homes at more favorable rates. There are a number of excellent reasons for refinancing a home, but there are a number of important things to consider before taking the plunge.

People refinance their homes for many reasons, but chief among them of course is the desire for a lower interest rate and a lower monthly payment. In some cases the homeowner may even be able to shorten the length of the mortgage loan through a refinancing deal. People with a thirty year mortgage may be able to use todays lower interest rates to cut the term in half while still enjoying an affordable monthly payment.

Before you decide to refinance to lower your monthly payment or shorten the length of your loan, however, there are a number of things to consider. These considerations include:

-The interest rate is the most important consideration. It is important to remember that even a small difference in the interest rate can pay off in a short period of time. This is especially true since it is often possible to find a lender who is willing to waive certain routine charges associated with refinancing. Some banks and other lenders are willing to waive application fees, appraisal fees and legal fees, and important consideration, since these fees can easily add up to $1,500 or even $3,000.

-There is generally a price to pay, however, for this waiver of fees. In most cases, the lender who is willing to waive those fees will charge a somewhat higher interest rate than you could get elsewhere. It is up to you to run the numbers and determine if the higher interest rate is worth it.

-It is important also to consider how long you plan to stay in your home when making a refinance decision. Those homeowners who plan to stay in the home for at least three to five years may be able to justify paying points and closing costs in order to refinance the loan. Again, it is up to the homeowner to determine if the lower interest rate justifies the points and closing costs he or she will be required to pay.

-Another important consideration is whether to pay the points and closing costs up front or add them to the amount of the loan. Some homeowners who are strapped for cash prefer to add the closing costs and points to the loan, and if the interest rate is right the monthly payments can still be a lot lower. It is important to check the math and decide which approach works the best for you.

Brooke Sikula is a freelance writer based in Ventura, CA and writes on a wide range of topics from home improvement to credit repair and everything in between. She is a regular contributor to and

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