It seems that every time I turn on my computer, there is an advertisement on the screen encouraging me to refinance my mortgage.  “OBAMA ENCOURAGES YOU TO REFINANCE YOUR MORTGAGE” says one advertisement.  Surely I should then, Right?  … Well, it depends.

There are a number of factors that need to be considered in determining whether you should refinance your mortgage.  The following is a copy of a Mortgage Calculator that we have on our website (I’ll give you the link at the end of this article) that helps you consider all of those factors:

The point is that the interest rate is not the only factor you need to look at.  If you extend your loan term and are charged a whole lot of fees to lock in a  lower interest rate, you could end up paying a whole lot more for your mortgage than you might think … especially if you don’t plan to stay in your house for the entire term of the mortgage.

Our recommendation is to always be sure and test out the costs/benefits by using a Mortgage Comparison Calculator similar to the one we have on our website and ALWAYS ask your lender UP FRONT what their fees are.  Mortgage lenders are required by law to give you a disclosure that estimates those costs!  It is referred to as the Truth-in-Lending Disclosure and it takes all of the costs associated with the loan and annualizes them over the term of the loan and comes up with a REAL (APR) rate.  As a general rule, the stated rate and the APR rate should not differ by more than 1%.

Obviously, people refinance for more than interest rate savings (e.g., decreasing monthly payment, pulling out equity, etc.), but you should go into the loan knowing the true effect.

We hope this information helps both in your understanding and in the practical application of deciding whether to not to refinance.  Our goal is to provide you with “above and beyond” service.   Please keep us in mind the next time you or a friend or family member is in need of a real estate agent whether buying or selling.

Click Here to go to the Mortgage Calculator pictured above.  Just be sure and scroll down until you get to the right calculator.