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Mortgage rates are constantly fluctuating. Depending on the interest rate and other terms of your current mortgage, you may have the opportunity to save significant money and improve your monthly cash flow. You also may have the opportunity to consolidate credit card debt and other costly financing that you may currently possess.
Many people still use the rule of 2% (decrease in rate) and 2 years (remaining in house) to make a refinancing decision. This does not always work. If you will keep the mortgage for more than 2 years, a 1% decrease in the rate may pay off.
There are many factors to be considered including the cost of refinancing, mortgage balance, length of time the mortgage will be held, among others.
You should really run the numbers in order to make the right decision. Refinancing can be an opportunity for you to put money in your pocket without taking any risk.
Some lenders offer no cost refinancing where the lender pays all closing costs. This is not to be confused with the lender adding the closing costs to the mortgage balance to avoid a cash outlay. The rate for these loans is typically .25% higher than a loan where you pay the costs. With this type of loan, it would almost always make sense to re-finance with even a minimal decrease in the mortgage rate.
Posted: July 16, 2008