Weighing the Options of Refinancing

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It has been said that only when your new interest is at least 2 points lower, should you refinance your mortgage. Maybe several years ago that was wise advice, but since refinance costs have been falling recently, it could be time to look into it. Refinancing your loan has a number of benefits that can make it worth the up-front cost many times over.

Advantages

When you refinance, you might have the ability to lower your interest rate and mortgage payment , perhaps significantly. You also may be given the option of tapping into your home equity by "cashing out" a sum of money to remodel your home, consolidate debt, or plan a special vacation. You could be able to refinance into a shorter-term mortgage, enabling you to build your equity quicker.

The Cost

All of these benefits do cost something, though. You'll have almost the same kinds of closing expenses and fees as you did when you first bought your house. These include escrow, title, credit report, appraisal fee, lender fee and escrow/impound account.  All of these costs are indifferent with all lenders. Unlike when you first bought the house, when you refinance - you have an option to either pay the closing costs or finance it into the new loan amount so you need not pay for it at closing.