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When you're making your decision, there are several things in mind.
First, even a small rate cut can pay off quickly. That's because
you can easily find mortgage companies willing to waive routine refinancing
charges such as application, appraisal and legal fees (which can add up to
$1,500 to $3,000). Of course, in exchange for low or no up-front costs, you'll
have to be willing to accept a rate that's somewhat higher than the prevailing
rock bottom.
Second, if you are planning to stay in your home for at least three
to five years, it may make sense to pay "points" (a point equals 1% of
the loan amount) and closing costs to get the lowest available rate.
And third, you
can avoid laying out cash and still get a low rate by adding the points and
closing costs to your new mortgage. Does that mean shouldering a lot of extra
debt? Not necessarily. If you've had your current mortgage for at least three
years, you've probably reduced your balance by several thousand dollars. So you
may be able to tack your closing costs onto your new loan and still end up with
a mortgage that's smaller than your original one -- plus, of course, a lower
rate and lower monthly payment. |
