With historical low interest rates, are you asking yourself whether or not I should refinance my mortgage? Do I make the plunge now or wait to see if interest rates fall even lower?

Refinancing your home with confidence

If you answer yes to these four basic mortgage refinance rules, then you should run, not walk, to refinance your home mortgage. However, if you answer no to any of basic rule of thumbs, then you need to slow down and think through whether you could actually save money with refinancing your home.

Q1: Are you lowering your mortgage interest rate?

If you cannot even answer yes to this easy question, then you should not be thinking about refinancing your mortgage. The only time you should answer no to this question is if you are going from an adjustable interest rate to a fixed interest rate.

Q2: Would you pay less each month?

Once again, this question could be a no if you are going from an adjustable interest rate to a fixed interest rate on your mortgage. However, if you shorten the term of your mortgage, your payment might increase; but in the long run, you will save money by paying off your home mortgage faster.

Q3: Would you shorten the loan term?

Not everyone refinance their mortgage with the goal of saving money by paying off their mortgage early. Are you refinancing your mortgage to pay off the mortgage early or to increase cash flow with a lower monthly payment?

Q4: Can you do Questions 1 through 3 without paying outrageous fees to refinance your home?

A rule of thumb for r-financing is for the fees to be less than 6 months worth of interest on your existing mortgage.  If the fees are outrageous, you would need to calculate whether it might be a better idea to put the money you would have paid in fees into the principal of your existing mortgage.

Mortgage refinance with confidence

If you answer yes to all 4 questions, then it is a no brainer to refinance with a reputable bank.

However, you answer no to any of the questions, then you need to ask yourself, what is the goal of refinancing your mortgage? Is it to get a fixed rate? Is it to get more monthly cash flow? Is it to shorten the term of the mortgage so you can pay it off earlier?

The answer to these questions would guide you to a successful refinance if you take some time to consider them. Happy refinance!