Time to Refinance?
Like anything else, refinancing has its good points and bad. The most common reasons to refinance include:
lowering the interest rate or reducing the length of a mortgage
making home improvements
locking in interest rates if you have an ARM or converting to an ARM if rates rise
escaping a mortgage with a balloon provision and no conversion option, and/or consolidating debt.
Calculating your savings…
Figure the following to help decide if a refinance is a good idea for you: current monthly payment, original cost of the home, itemized refinancing costs, monthly payment after the refinance, how long you plan to live in the house after the refinance, amount owed on the house, and the break-even point (total cost of the refinance divided by monthly savings on payments).
Many online “calculators” also provide refinancing data, including http://www.reficenter.com and http://www.smartmoney.com.
Plan carefully when you refinance:
Close your credit card accounts after consolidating debt. Make home improvements right away. Leave some equity in place for your security.