Every home owner has a unique set of circumstances and needs, the answer to this question may be different for every home owner. There are a variety of reason for refinancing, ranging from lowering your interest rate, shortening your loan term, taking cash out for home improvements and consolidating existing debt, just to name a few.
One of the most important things to consider when you are examining your options, is what the cost of the loan is. On refinances, you are able to roll your closing costs into your loan so there is no “out of pocket” cost. However, be wary! While it may be rolled into your loan, it is still a cost. You may not realize this cost until you go to sell your home, so make sure you look carefully at any fees that you will be responsible for on your refinance. A good rule of thumb to examine is your break even point. You calculate that by taking the cost of the transaction, and dividing it by your monthly savings. For example, if your refinance is going to cost you $3,000 and it saves you $100 per month, you will break even for this move in 30 months. This is important because you may be in your forever home, or you may be in your starter home and this is extremely important when you examine your refinance options. There are also programs available where you can pay reduced, or even no closing costs for your refinance.
There are many different options available for refinance products, please consult with your loan officer in order to receive sound advice on which programs may be best for you! Check out the Wall Street Journal’s take on refinancing too.