With mortgage interest rates dipping to historic lows, many homeowners may be asking this very question; should I jump on the refinance bandwagon now?  The answer will naturally be contingent on a number of factors, first and foremost your ability to qualify considering tightened lending standards, along with the equity (or lack thereof) available in your existing home mortgage. If you are able to fulfill these two critical aspects of the equation successfully, then there is a strong likelihood that the answer will be “yes” to the refinance dilemma; but more homework should still be done.

Are you one of those folks with one of those easy come, easy go, adjustable rate mortgages that were all the rage during the housing bubble of 2004-2006? Even if your current rate is at a “reasonable” level, say, 6%, you need to consider the long-term; it is likely a pipe dream to think they are not going to head North again, so capitalize on the present and “bite the bullet” as they say. Now may well be the optimum opportunity to lock into a fixed rate for the long term, and refinance out of an unpredictable adjustable rate mortgage.

Naturally, you have to consider first and foremost your long-term plan as far as the length of time you plan to stay in your home, and balance that with the savings that you will reap as far as reduced monthly payment and any up-front costs associated with the refinance process. There is no “magic number” as far as interest rate reduction that will apply across the board for every situation; some industry analysts have used a 2 point reduction as a cutoff in the past in order to justify the costs, but in these unprecedented times, there are no set rules. The bottom line is, if you don’t plan on being in the home much longer, then the lower payments associated with refinancing won’t justify the closing costs.

With a typical refinance, the goal is to lock in a lower interest rate in order to lower your monthly payment– and, if you are one of the lucky few in today’s market and have the necessary equity in your home, you may even have the additional benefit of being able to stop paying private mortgage insurance (PMI).

There is no free lunch though (oh, except in those investment– I mean sales– seminars); in order to obtain this lower rate you’ll have to purchase the new loan and pay the required closing costs associated with that loan. This is true even if you opt for a no or low cash closing; with these options, the costs are still there they are simply inserted in through utilizing a higher interest rate or included in the principal balance of the loan, so understand what you are signing on for and don’t be afraid to ask questions.

Is it time to refinance? For many folks, the answer may be a resounding yes. In a time when most economic news is disheartening at best, the opportunity for locking in an incredible interest rate on a home loan for the next 30 years is available for a select group of individuals; if you are in this group, listen up!!!

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