15 minutes can save you 15 percent or more on your mortgage

Post date: Apr 27, 2011 12:40:30 AM

With interest rates at historic lows, homeowners across America are refinancing their home mortgage loans. By refinancing into a lower interest rate, they expect to save thousands of dollars over the life of their new mortgage loan. But how do you determine whether to refinance? How do you know if it is worth it to refinance? Refinancing can be complex, and a few minutes of careful planning could save you thousands on your refinance. Here are three key guidelines to follow when refinancing.

All of these five elements mentioned in point 3 above are variable. Let's consider the term. If your goal is to reduce your monthly mortgage payments, then you may want to consider a 30-year mortgage, because the monthly payments will be lower than what you're paying now. If you are capable of making the same monthly payments as you are now and hope to pay off your mortgage sooner, then a shorter term, with correspondingly higher payments, may make sense.

For example, let's say you have a fixed-rate 30-year mortgage at 8% and your initial loan amount was $180,000. Your payments, not including taxes and fees, are $1,320 per month. You've been paying for six years, so you have 24 years left on your loan. You go online and see that you might be able to get refinanced at six percent. You need to borrow the principal amount left on your current mortgage, which is $165,000. Using one of the free online mortgage payment calculators, you plug in the numbers.

You see that you have choices.

What are your objectives? If you anticipate living in your home forever and are young enough to expect to complete the full mortgage term, then it makes sense to pay as much as you can and own your home as quickly as possible. But if you anticipate moving in the next few years, you need to consider the cost of refinancing and whether or not it will pay to refinance to lower your monthly mortgage payments.