Deciding when to refinance your mortgage loan

Refinancing can be a good option, but it isn’t always wise. Constantly refinancing in order to get a lower interest rate can actually rack up your budget with closing costs. There are two main purposes for deciding to refinance. One reason is to reduce the interest cost and to extend the term of the loan. The second reason is to consolidate your mortgage and home equity loan.

Rates fluctuate with the economy

If you’re going to refinance, it’s best to only do it once. Of course, this takes a careful eye for good timing as you don’t know how high or low interest rates might go. For instance, last November, the rate for a 30-year fixed mortgage reached a historic low of 3.31%. It’s already gone back up, however, to 3.63%. Rates are highly dependent on the strength of the economy and housing market. Fox business suggests you enroll in Bankrate’s weekly Rate Trend Index and Mortgage Analysis to receive a weekly email of interest rate trends.

Only refinance if you plan on staying a while

Refinancing will only make sense if you plan on living in your home for quite a while. This is because in 2012, Bankrate estimates "the national average for closing costs on a $200,000 loan was $3,754. The fees in the survey don’t include taxes, insurance, or prepaid items such a s prorated interest or homeowner association dues."

To know whether it’s worth your while to refinance, you’ll want to figure out your current loan terms and interest rate, your credit score, and whether your loan agreement includes a prepayment fee. You’ll also want to take into account the idea that if you get a lower rate but extend your loan, you’ll still end up paying more interest in the long run.

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Source: http://www.foxbusiness.com/personal-finance/2013/03/07/when-should-refinance-your-mortgage-loan/

https://www.chicagotribune.com/business/breaking/chi-mortgage-rates-rise-to-7month-high-20130314 0 2868409.story

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