Mortgage refinance Loans can be a great way to save money in the short term, and over the life of your loan.  It’s also a good way to protect yourself if you are currently in an adjustable rate mortgage and looking for the stability of a fixed rate mortgage. 

Current mortgage refinancing rates are low and there are lots of options out there, so before you make a commitment to refinance your mortgage, it's important to do your homework and determine whether such a move is the right one for you.

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Is a mortgage refinancing loan right for you?

With current mortgage refinancing rates at historic lows, Americans are lining up for mortgage refinancing loans to lock in lower rates and save money on their monthly payments.  But it may not necessarily be the right financial move for every home owner.  When you get your mortgage refinancing quotes, it’s important that you figure out how long you plan to stay in your home then factor in the expenses associated with the refinance – then calculate how long it will take you to break even. 

To make it simple, let’s say you have a quote to refinance your mortgage that will save you an additional $250.00 per month.  With various closing costs /processing fees and taxes, the home refinance could easily cost $2,500.  That means it would take you 10 months to break even on your mortgage refinance. (10 months x $250 = $2500)  Unless you plan to stay in the home for at least the 10 months to breakeven, plus another 10 months to realize the savings, it may not make sense to refinance.   So before you refinance, make sure you understand the costs associated and how long it will take to recoup your savings - otherwise, the only one making money is the bank. 

What to watch out for when comparing mortgage refinancing quotes.

Once you’re sure that mortgage refinancing loan makes sense, start shopping around for the best current mortgage refinancing rates – but be sure you’re comparing apples to apples.  Mortgage refinancing quotes can be affected by a number of factors including fees and the term of the loan.  Usually shorter terms will have lower rates, so a 15 year fixed may be offered at a significantly lower rate than a 30 year fixed rate mortgage, but you will end up with a higher monthly payment due to the shorter term. 
Interest rate “adjustability”.  Adjustable rate mortgages will offer low rates and low payments with interest only options, etc.  But these rates will adjust over time, and making interest only payments does not pay down the principal amount owed on your home.

Points are the last way that lenders make it seem like they have a lower rate when comparing refinancing quotes online.  With points you’re basically paying for a discount on your loan.  A “point” is a percentage point multiplied by the total amount of the loan.  So buying a point on a $200,000 loan amount would cost you an additional $2,000 ($200,000 x 1%) along with your other costs, to close the loan.  If the saving outweigh the costs, buying points can make sense, but be aware of them when you are reviewing the current mortgage refinancing rates.

If you still have questions or concerns about whether refinancing is right for you, upfront mortgage lenders and brokers can provide mortgage refinancing quotes and information in a hassle-free, consumer friendly environment.