Check the market closely to determine the
available rates and costs associated with refinancing. These costs
can include items such as an appraisal and other various fees
and points. Then determine what your new payment would be if you
refinanced. You can estimate how long it will take to recover
the costs of refinancing by dividing your closing costs by the
difference between your new and old payments (your monthly savings).
However, the ultimate amount you may save depends on many factors,
including your total refinancing costs, whether you sell your
home in the near future, and the effects of refinancing on your
taxes. The old rule of thumb used to be that you shouldn't refinance
unless the new interest rate is at least two percentage points
lower. However, many companies are now offering zero point loans
and low cost refinancing. Therefore, even if your rate change
is less than one percentage point, you may be able to save some
money by refinancing.
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