Ever heard the old rule of thumb, you should only refinance if your new interest rate is at least two points lower? That may have been true years ago, but with refinancing dropping in cost over the last few years, it's never the wrong time to think about a new loan! Refinancing has a number of benefits that often make it worth the up-front expenditure many times over.

For starters, home values are much higher than they were, even three years ago.  Average mortgages used to be around $150,000, now $350,000, $400,000, and even $550,000 loans are common place.  A 1/2% or 1% reduction in interest rate can be $2500 to $5500 in savings annually.  At a savings of $300, to $500 per month, it's like getting a car for free.

If your previous loan was a high loan to value mortgage, or 100% financing, the growth in equity in your home may also negate the need for a second mortgage.  Secondary financing is a much higher interest rate than a typical, conforming, 80% or lower loan-to-value mortgage.  Frequently, the monthly payment on the small, junior loan, is nearly as high as the first mortgage.  If this is the case, refinancing your home into a single mortgage will usually reap substantial monthly savings.

You might also be able to "cash out" some of the built-up equity in your home, which you can use to consolidate debt, improve your home, take a vacation -- whatever! With lower rates and balances, you might also be able to build up home equity faster with a shorter-term new mortgage.

All these benefits do cost something, though. When you refinance, you're paying for most of the same things you paid for when you obtained your original mortgage. These might include settlement costs and other fees, an appraisal, lender's title insurance, underwriting fees, and so on.

You might have to pay a penalty if you refinance your previous mortgage too quickly. That depends on the terms of your existing mortgage and we will be happy to look into that for you, and make a determination. These penalties are illegal in some places, and more often than not when they're there apply only for the first year or two. We'll help you figure it out.

Ultimately, for most people the amount of up-front costs to refinance are made up very quickly in monthly savings. We'll work with you to determine what program is best for you, considering your cash on hand, how likely you are to sell your home in the near future, and what effect refinancing might have on your individual situation.