Refinancing a Mortgage
Refinancing a mortgage at a lower interest rate is not always the right decision, even if the conditions are as favorable as they are now. In a number of cases it may be more reasonable to stick with your current mortgage.
It is important to understand that a refinance doesn’t pay off the debt, but rather restructures it at a lower interest rate and a different loan term. The goals of refinancing are reducing the interest expense, extending the loan back out to 30 years at a lower monthly payment, debt consolidation etc. For refinancing to make sense, you should be planning to be in the house for awhile. Think of how many months of lower payments it will take to recoup the closing costs of the new mortgage.
If you don’t plan to stay in the house for long, staying in your current mortgage is a wiser decision. As you know, there are cash-out refinancing and standard “plain vanilla” refinancing options, each with its pros and cons. When making a decision about refinancing, make no mistake about fees and closing costs which tend to add up quickly. You many need an extra $10,000 to cover the fees that are involved in the refinancing of a current mortgage.