Wednesday, August 14, 2013
As the economic recovery continues, interest rates are starting to creep up from historic lows.
Experts say homeowners who refinanced a home loan in the four percent range earlier this year reduced their mortgage by an average of 1.9 percent. That amounts to a savings of about 35 percent off the homeowner's monthly mortgage payment.
Tony Morton of Yahoo Homes says here are some things you should consider before refinancing:
1. Is your current interest rate five percent or higher?
If you have a 30-year fixed rate mortgage at five percent or higher you should think about the savings you could see from refinancing to a lower rate. The experts say one percent is usually a good reason to refinance.
2. Can you afford the closing costs?
Those costs can run from three to six percent. You need to consider how long it will take you to recoup those costs. Mortgage lenders will fold the costs into the loan, but you may pay a higher rate. So consider saving up the money and pay for your closing costs up front.
3. Will refinancing eliminate private mortgage insurance or PMI?
If you're paying for PMI and the price of your home has risen recently you could see some savings by refinancing. Lenders require you to pay if you have less than 20 percent equity in your home. So a refinance could eliminate that cost.
For a complete list of the refinancing questions, click on the link.