EchoBay Expert: Interest rates just don't seem low enough to motivate me to refinance my home loan, but it seems all my neighbors have done it recently. Am I just being lazy or are there any other reasons why I should get fired up to do a mortgage refinance now?
Loyal Reader: There are several other reasons to seek out a mortgage refinance loan other than just rates.
First, when rates drop, you can often refinance for a shorter term while keeping your payments the same. This will enable you to pay off your home sooner and save thousands in interest.
Second, if you have a jumbo mortgage, it is always a good idea to refinance when your loan amount qualifies you for a conventional mortgage. Conventional mortgages have lower rates than jumbo mortgages since they are smaller in size and less of a risk to lenders.
Third, if you have a variable interest rate, it may be wise to refinance for a fixed rate when rates drop. Over a thirty-year term, rates can fluctuate dramatically causing dramatic swings in your payments as well. By refinancing to a fixed rate, you can eliminate the uncertainty that is associated with a variable interest rate.
Do be sure to calculate the breakeven point if you decide to take out a mortgage refinance loan. You can do this by looking at your potential savings compared to the closing costs to see how long you would have to stay in the house to truly begin reaping the rewards from a refinance.