In tough economic times like we are currently in along with low mortgage rates , people are refinancing for many different reasons.  Because of my 20 years of experience I do have some advice and suggestions to offer to customers looking to refinance.

              A few things to think about........

1.  If you are in a situation where you are telling me, "I need to lower my monthly payments", you are probably in a position where making the best financial choice as to refinance or not refinance might not be an option. You probably need to refinance and will do whatever it takes to do so.  A lower monthly payment is necessary and is probably your only goal.  I understand and I'm here to help.

2.  Consider a "low" or "no" closing costs option.  Yes, the rate is going to be a bit higher to do this but you're also not taking thousands of dollars out of your pocket or adding thousands of dollars to your principal balance for closing costs.  Example...$200,000 loan amount at 5.875% is a payment of 1183.08.  If you could refinance for $500.00 total cost to a rate of 5.40% for a payment of 1123.06 without adding anything onto the principal, that's a savings of 60.00 per month for a cost of $500.00.  Seems like a no-brainer.  I could find something to do with $60.00 per month for the next 30 years or $21,600.00 over the life of the loan!  If I move in 2 years....who cares!  Nothing lost.

3.  "My friend told me he got 4.25% on his refinance".  Friends and co-workers love to brag about the interest rate they received for their refinance.  They never tell you that they added thousands of dollars in closing costs to their principal balance to get that rate.  I know......I've refinanced some of these friends.  A) you need to have a reasonable amount of equity in your home in order to add thousands of dollars in closing costs to your principal balance for refinancing. B) you better be somewhat certain you are going to be in your home a long time to make the additional principal worth it.

4.  Don't get so hung up on rate!  While a low interest rate is important, there are fees associated with low interest rates.  Many times lenders are willing to give you a low rate but what they're not telling you is that they are adding thousands of dollars on to your financed loan amount for points and closing costs.  I've seen some situations where the customer was saving $150.00 per month which was very attractive, but they also added $8,000 in closing costs onto the principal balance of their home.  Again, if the $150.00 savings per month is all that matters, I understand.  From a financial point of view, you need to be in the house for at least 4 - 5 years before you're going to be able to say  "I'm glad I refinanced".  Have a reasonable certainty that you will be in the house "forever".

5.  Think twice before refinancing to a shorter term.  While this might be a sound financial decision because you pay less interest and pay your loan off faster, you are now obligated to make the higher monthly payment.  I've done many refinances for people from a 30 year term to 20 or 15 years who ended up refinancing back to a 30 year term due to job loss, lower paying jobs, forced to take early retirement, illness etc......   If you're disciplined enough, you could take a 30 year term and pay extra every month if you have the extra money to do so.  If you don't have the extra money, you're not obligated to make the higher payment.  Try refinancing when you don't have a job...you're not going to get approved.

6.  Lower monthly payments aren't everything!  Let's look at the case where you have 20 years left on your mortgage and your principal and interest payment is at 900.00 per month.  You are now quoted a principal and interest payment of 700.00 per month for 30 years.  If you continue paying your current payment at 900.00 per month for 240 (20 years) months, you'll have paid in $216,000.00.  If you take the $700 per month option for 30 years, you'll pay in $252,000.00.  That's a savings of $36,000 to have kept your current mortgage.