Refinance Considerations

When making your decision to refinance your home, there are several things to keep in mind. First, understand that even a small rate cut can pay off quickly. 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 roll 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.

Get Your Hands on Some Cash

Another way to make a refinance work for you is to refinance for more than the balance remaining on your old mortgage -- in effect, tapping into your home equity, or "cashing out," in mortgage speak. Thanks to favorable rates, you may be able to do so without boosting your monthly outlay.

Build Home Equity Faster

Many borrowers use a refinance to shorten the term of the mortgage. And brace yourself: Even at low rates, a shorter term means a higher monthly payment. The benefit is that you'll build up equity faster and pay far less in total interest over the life of the loan.

Refinance Once Then Do It Again

When rates fall steadily, refinancing may make sense even if you have done so once already. To exploit continued decline in rates, we recommend staying in close contact with your Community Central Representative, they stay on top of the mortgage market to make sure that your home lending goals are reached and exceeded.