Are You Tempted To Refinance Your Mortgage Again?

As of Thursday, according to Freddie Mac’s weekly survey, the average rate on a 30-year loan was 3.84 percent, down from 3.88 percent the previous week and 4.71 percent around the same time a year ago.

Many people are considering refinancing and many already have. If your nervous about missing out on the lowest interest rates within 50 years slow down an consider all that goes into a refinance plan and if it is beneficial to your long term goals.

If you’re considering refinancing, financial planners suggest you first review your financial goals — specifically, how long you expect to live in your home.

Refinancing doesn’t make sense if you are planning to sell  your home within a year or two. You will not be in your house long enough to recoup the refinance costs before selling.

Also, when you refinance, your starting all over at the top of the amortization tables. In the first year of a $300,000 30-year mortgage at 4 percent, a borrower would have paid off 1.76 percent of the balance; in the fifth year, that rises to 2.06 percent.

The amount of interest your paying compared to the amount of principle you still owe may make refinancing a moot point. Restarting a 30 year amortization puts you further away from paying off your home by making the principle part of your payment smaller and your interest paid larger.

Before you even try to refinance make sure you have at least 20 % equity in your home. Those with low equity or underwater homes will be wasting their time by starting the refinance process. Also check with your current mortgage holder to refinance because they may be able to save you money by reusing your survey, appraisal, and title insurance.