How to Refinance Your Mortgage

A Home Buying Article Contributed by Robert Scalia

So You've Decided to Refinance Your Mortgage

Deciding if mortgage refinance is right for you is no easy task. It will depend on many factors, including your tax bracket, the length of time you plan to stay in your home and, of course, the mortgage refinance costs themselves.

But if you've decided to take the plunge, here are a couple of tips that will ensure that your mortgage refinance goes off without a hitch.

Here's How to to Go about Your Mortgage Refinance

When you go about getting a mortgage refinance, you first want to check to make sure you will not be charged for paying off your original loan early. Why get off on a bad foot.

Keep in mind that your total refinancing expense depends on your settlement costs, interest rate, points, and all those other costs required to obtain a loan. So you'll want to talk to some lenders to determine the rates that are available and just how much appraisals, attorney's fees and the likes will actually cost you. Then you can determine what your new payment would be if you decide to go ahead and refinance your mortgage.

As a rule of thumb, keep in mind that shopping for points and interest rates can definitely save you money. One point will usually add roughly one-eighth to one-quarter of one percent to the interest rate offered by the lender.

To decide what combination of the two will suit you best, you have to try and find a balance between the amount you can pay up front and the amount you can pay out on a monthly basis. Remember, the longer you keep the loan, the cheaper points become.

Some lenders may even offer to finance the points, just so you don't have to pay them up front. This is another option that you should consider.

When you refinance your mortgage, the settlement costs will include fees for the loan application as well as fees for the title search, appraisal and credit check. Nothing comes free. You may even have to fork out for the record fees and the transfer taxes.

Low interest means you will have less to deduct on your income tax return. Some other possibilities include a 15-year, fixed-rate mortgage. The payments will be higher, but you will be paying a lot less interest over the life of the loan, which will allow you to build equity faster.

It's also important to remember that you don't necessarily have to refinance your mortgage with your original lender. But these lenders will likely offer you more competitive rates.

Whatever you decide, just make sure the lender gives you a written statement of the costs and terms of the financing before you sign anything. This isn't just prudent - it's actually required by the Truth in Lending Act.

A Last Mortgage Refinance Tip to Help You Through

The golden rule is simple: You don't refinance unless you are saving at least 2% on interest. If you won't be saving this much, it's not even worth the efort.