How to Know When to Refinance Real Estate

When the interest rates drop and you want to know if refinancing your real estate will save you some money, there are some techniques for figuring out the best move. Since no one is psychic and can predict the coming rates, knowing how long you'll remain in the home and other factors will help you decide.

Difficulty: Moderate

Instructions

1. Refinance if you have an Adjustable Rate Mortgage (ARM) and you think the interest rates may take a big increase. In inflationary periods, interest rates rise and you could face big payment increases.

2. Refinance if you purchased your home when the interest rates were high and you're going to remain in the home for a few more years. Compare the cost you will pay in loan origination fees and closing costs to what you will save in interest.

3. Refinance if your loan has a balloon payment coming due and you have decided to keep the house. Balloon payment loans are set up to allow you to pay a lower rate in the initial phase and then pay a lump some after a few years. These loans are beneficial when you plan to sell your home before the balloon. If you change your mind - refinance.

4. Refinance if you're in an interest-only loan and the value of your home is decreasing. You can quickly lose money - and lose your home in this situation. Refinance as soon as it becomes apparent that the housing market is on a downturn.

5. Use a mortgage calculator to decide if refinancing your real estate is the right move for you. (See Resources below)

Resources

• Refinance mortgage calculator.

[Tippy]

on 1/2/2009 You have to have real estate before you can refinance it. Sigh.

[Dawnella66]

on 10/16/2008 great article!

[Fuller1972]

on 8/15/2008 All good reasons to decide whether to refinance