Three Questions to Consider When Refinancing Your Home

Many homeowners are looking to lower their monthly payments by refinancing their mortgages. Among those most interested in refinancing are those who purchased their homes when mortgage interest rates were high and those who financed with an adjustable rate mortgage. But, the question that inevitably arises is "How can I make sure I'm getting the best deal available?" Here are three questions you can ask to help you properly analyze your refinancing options.

When Should I Refinance?

Obviously, if mortgage interest rates are declining and you're needing to lower your monthly payment, the time may be right for you to refinance. But, you have to know the best price point for your situation. As a general rule, you shouldn't consider a refinance unless the current market rate is at least two points below your current mortgage rate. It is useless to refinance for a one-point difference because the savings are insignificant and not worth the closing costs and fees that go with it.

Is It Worthwhile for You to Refinance?

If you plan to stay in your home for many years, refinancing may be the right move for you. But, if you're thinking that you may want to purchase a new home within the next few years, it is probably better to stay with your current loan. And, even if you're planning to stay in your home for a while, you should always request an estimate on refinance closing costs before agreeing to sign any documents. Lenders have different refinancing procedures so it may not be worthwhile to refinance your home if the process results in only a small savings with high closing costs and fees.

Did You Compare the Terms Among Your Various Options?

You should contact your current lender and discuss the possibility of refinancing your home. In most cases, your current lender might waive certain fees that could lower your overall closing costs to refinance your home. Also, try to negotiate a "no-cost refinance." Above all, remember to compare lenders and rates. You'll find a lot of variation among lenders so it's wise to shop around. Going online is the best way to find mortgage brokers and choose from among a variety of different offers. Having multiple offers also gives you the option of starting the process over very easily if the deal you think you're getting falls through at the last minute. Having more choices and offers gives you greater flexibility in refinancing your home.

Getting a great refinance deal with a lower interest rate that can lower your monthly payment is possible in today's market. It's a process that takes work on your part, but it is possible. Answering these questions will help you find the best deals available for your situation.