Financial Tools
Refinancing your Home

Refinancing a home is the process of paying off an existing mortgage(s) and obtaining new financing at the current rates and terms. Here are several reasons for refinancing:

• To lower monthly payments
• To obtain cash to pay for obligations
• To obtain cash for purchases or reinvestment
• To expand the existing property
• To pay off the existing mortgage holder

Drops in mortgage interest rates may provide an opportunity for you to refinance your existing mortgage. Remember that a 1% drop in the interest rate on your mortgage may save you thousands of dollars in interest over the term of the loan.

The general rule is that it pays to refinance when the interest rate will drop by at least 2% and the refinance costs will be repaid from the monthly payment savings within 36 months. Unless you meet this general rule for financing or have a profitable exception, refinancing could be a mistake. Talk to a professional mortgage lender to see what options you may have.

Expenses for refinancing can vary among lenders by thousands of dollars. It pays to shop around. Ask a Realtor® for recommendations about reliable lenders; the "cheapest" is not always the best. Consult at least two banks, two S&L's, and two mortgage brokers and ask a lot of questions.

You can anticipate paying additional costs to refinance your home. The amount of those costs varies between lenders. These costs include loan fees, appraisal and application fees, credit report fee, title insurance, document fees, and prepaid interest.