Refinance

Should you refinance your home mortgage?  At writemortgage we encourage you to carefully examine the pros and cons of refinancing your home mortgage.  The following information should help you out.

That's a question many homeowners ask with lower mortgage rates becoming available.

But, how do you decide if refinancing makes sense in your particular case? The answer depends on many factors, including your tax bracket, the length of time you plan to stay in your home, and the additional costs and charges you must pay for the refinancing.

Refinancing your loan allows you to take advantage of  many improvements in your credit or drops in market interest rates. Finding out if now is a good time to refinance is free. A popular option when refinancing is what is called a "cash out refinance." When you refinance you can make a small increase in your loan amount and get the money  as cash.

Another benefit of refinancing is being able to consolidate other high interest debts into your new home loan to save on interest expenses. Many homeowners with 15 year loans decide to refinance to a longer loan term of 20 or 30 years to lower their monthly payments.

The advantage of being able to consolidate  your debts into your home mortgage with a refinance is that your interest payments may not only be lower, they are also tax deductible. If you are on an adjustable rate mortgage, refinancing is also an opportunity to lock in at today's rates on a fixed rate mortgage.

Ask yourself these questions:

1) What is your current interest rate?

2) What is the current market interest rate?

3) Is the rate fixed or variable?

4) How long do you plan to stay in this home?

5) Do you have cash available for the closing costs?

6) Is the value of your home increasing, decreasing, or staying about the same? What are the short term and long term prospects for the value of your house?

Analyze answers:

) and 2) As a rough rule-of-thumb, if the difference between your current mortgage rate and what is available is approximately

1 1/2 percentage points or more, it may be to your advantage to refinance. If the difference is 1 1/2 points or less, it may not make sense to refinance, depending on the amount of closing costs.

3) If you have a variable rate, the rate is continuing to climb every year, and the current market interest rate is lower, it may be advantageous to refinance your house.

4) If you plan on staying in your current house for more than three years, it may make sense to refinance. If you feel confident that you will be moving in less than three years, it will probably be better to stay with your current loan (unless there is a large variance between your current interest rate and what is available).

5) In most cases, you will need at least some cash for closing. FHA and VA loans will allow you to "roll-in" certain closing costs into the new loan, but some cash will still need to be available.