From a homeowners point of view, you should refinance if it improves the rate that you are paying the lender to use the money. For fixed mortgages, this would be about a 2% drop in the rate. If you have an ARM and your credit situation is okay or has improved, definitely do it before the increase comes. Watch out for the fees charged to do a refinance so that you do not end up substantially increasing your principle in return for a rate that doesn’t do much for you. There is also the matter of the loan starting all over again. I am not sure of the difference in the amount of your payment that goes to principle, but have noticed that it changes. Consider a 15 or 20 year loan instead. It has been popular to refinance in order to consolidate debt and to free up money from equity. This basically exchanges your future financial picture for issues in the present. It can leave you “upside down” as the housing values fluctuate and make a difference should you want to sell at the time when prices are low. While paying off present loans is worthwhile, it often delays the real changes that must be made to live within ones means.
Answer
From a homeowners point of view, you should refinance if it improves the rate that you are paying the lender to use the money. For fixed mortgages, this would be about a 2% drop in the rate. If you have an ARM and your credit situation is okay or has improved, definitely do it before the increase comes. Watch out for the fees charged to do a refinance so that you do not end up substantially increasing your principle in return for a rate that doesn’t do much for you. There is also the matter of the loan starting all over again. I am not sure of the difference in the amount of your payment that goes to principle, but have noticed that it changes. Consider a 15 or 20 year loan instead. It has been popular to refinance in order to consolidate debt and to free up money from equity. This basically exchanges your future financial picture for issues in the present. It can leave you “upside down” as the housing values fluctuate and make a difference should you want to sell at the time when prices are low. While paying off present loans is worthwhile, it often delays the real changes that must be made to live within ones means.