Taking Advantage of Low Interest Rates

Interest rates are so low it might be worth it to refinance your mortgage, but there are some things you need to be sure of before you decide.

Q: I’m paying $1,650 a month on my mortgage with a fixed interest rate over 6%. I’ve been thinking about refinancing my home, should I?

Interest rates are low right now, so that makes refinancing attractive, but there are a couple of things that you’ll want to find out before you decide. Let’s assume that you’re planning on staying in the house for a while longer, because if you’re just planning it sell it in a year or two, then refinancing isn’t worth it.

A:

There are a few reasons why you would want to refinance in the first place: lower interest rate, cut down on the term of the loan, lowering monthly payments or switching to a fixed rate. But, even if the purpose of refinancing is for the lower payments, you’ll be paying closing costs. After all, refinancing your mortgage means you’re starting over with a new loan (which pays off the old loan).

But if you’re looking to refinance you have to calculate your break-even point, that way you’ll know if you’re saving money. There are a number of online calculators that can help you figure out if it pays to refinance. CNN Money’s calculator allows you to compare three loan options, Bankrate.com has a rather in depth calculator and Lending Tree has multiple calculators.