A little corner to discuss home loans
When should you refinance your mortgage? Interest rates are at record lows in May 2009, but is that itself a compelling reason to refinance? First, will you be able to get a new mortgage with interest rates at least two points lower than the interest rate on your current mortgage? Because mortgage refinancing can cost a few thousand dollars up front in fees, it makes sense to refinance only when you would save more on the refinanced mortgage than you would spend on fees. For the average homeowner, cutting the mortgage interest rate by at least two percent creates enough savings to cover the cost of the mortgage fees. Second, how much longer are you planning to own this house? If you intend to keep the house for years to come, then it makes sense to do a mortgage refinancing. On the other hand, if you are leaving in only a few years, then it does not make sense to refinance unless you know when you are leaving and you need lower mortgage payments between now and then. In that situation, you may want to consider a non amortizing mortgage, which has a grace period of several years during which monthly payments are remarkably low.