Is refinancing right for you?

Earlier this summer mortgage rates hit their lowest level since the 1950s: 4.69 percent. And they remain at historically low levels.
There are good deals to be had, and for those of you already in a home at a higher interest rate, such a rate could mean a lower mortgage payment each month.

But is refinancing always a good idea? It depends. You have to weigh your personal situation carefully.

Refinancing your mortgage will save you money in the long run, but it will cost you money up front. Refinancing a mortgage will cost thousands of dollars. You must pay the mortgage broker or lender, plus the title company, appraisal costs, and fees to cover document processing, among other expenses.

You often read about “no fee” refinancing in which the upfront fees are not charged to you directly. They are instead tacked on to the new mortgage, or folded into the interest rate, making it slightly higher.

Is this a bad thing? No, it’s just a matter of your deciding what makes the most financial sense for you.
For instance, refinancing your home may save you $100 a month off the mortgage payment. But if the lender charges you $5,000 to refinance the mortgage, it will take more than four years before you break even on the refi cost and begin to see the “true” savings from the renegotiated debt.

So, if you plan to move in a short period of time refinancing your debt won’t actually benefit you.

If refinancing is something you have done with your home in the past, expect to see some changes in the process and options available this time around. Ever since the subprime mortgage fiasco and new regulations implemented by the federal government, refinancing requirements have changed.

Riskier loans have been eliminated. And expect your underwriters to take an even closer look at your finances in the application process.