Is It Wise to Refinance Mortgage Now?

As the tough economic times continue to weigh heavily on the country, consumers are seeking ways to reduce their monthly bills. Some simply want to save more money each month. And others who have lost their jobs or feel layoffs looming are trying to get by on less money. One of the easiest ways for home owners to cut monthly costs is to refinance. Mortgage bills are often the largest monthly cost for consumers. By undergoing a refinance, mortgage loan costs can be reduced significantly. Most people choose to refinance to save money on monthly payments. But some do it to gain peace of mind, as they trade in an adjustable rate mortgage for a fixed rate one. Whatever the reason for a refinance, mortgage holders can currently benefit from some of the lowest rates the country has seen in decades. The second week of February, the average interest rate for a 30 year fixed rate mortgage hovered at 5.19 percent.
For those who qualify for a refinance, mortgage payments can drop considerably. But refinancing may not be the wisest choice for everyone, regardless of how low the rates are. Deciding if refinancing makes sense for you takes some simple calculations. Your first step is to figure out the total of the actual refinancing. Things like title fees, closing costs, appraiser and lawyer fees will be added up here. Double check with your current bank to see if you will be saddled with any penalty fees for paying off your current mortgage earlier than originally anticipated. Your next step is to figure out how much you will save each month with the new refinanced rate. Simply take what your currently pay each month and subtract your estimated new payment. You now have your anticipated refinance total and your anticipated savings. The third step is to determine if the costs will be worth it to you, given how long you plan to own the house after the refinance. Mortgage refinancing might not be beneficial if a homeowner anticipates selling the property soon after a refinancing. That is because of how many months it takes them to actually start saving once the costs of the refinance have been paid. This is called the break even point. To calculate your break even point, divide the costs by the estimated monthly savings of the refinance. Mortgage holders who plan to own their houses longer than the break even point are wise to consider refinancing. Those who plan to sell their houses before they reach that break even point, will likely not benefit from refinancing.
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