If you’re considering refinancing your home, you’re not alone. Some homeowners are scrambling to beat a pending mortgage reset while others 
are simply wanting to find a better deal. A third group is even looking to consolidate some debt and are thinking of a new mortgage, an equity loan, or a equity line of credit to wipe out other expenses.
Tempting as it is to make a quick decision about home refinancing, it is always best to do your homework and weigh your options first. That mailing from a national mortgage lender, the email from a local broker, or the pop-up you got when visiting a personal finance site may be enticing, but better deals could be available to you.
Two key components should be considered when evaluating any refinance offer:
- What will your costs be to refinance?
- How much will you save each month by refinancing?
Some homeowners have been shocked to learn just prior to closing that they are responsible for thousands of dollars in closing fees, money that could be best used for reducing their debt.
If you can refinance for free, then the first question doesn’t apply. However, “free” may exclude some charges including title insurance, application fee, and related expenses.
Other things to consider when calculating your costs are:
- How big is your current mortgage? If you can’t handle the higher costs of a mortgage reset, then refinancing is the way to go.
- How long do you plan on staying in your home? If for just a year or two, then refinancing may not make sense. However, if you see yourself living in your home for at least the next five years, then you should recoup the costs related to refinancing.
Keep in mind that rolling your personal debt into a loan could be helpful, but it will add to the cost of your mortgage and add in an additional monthly expense in the form of an equity loan/line of credit payment.
Finally, keep tabs on the current financing trends. If rates are trending downwards, waiting to refinance could save you additional monies, perhaps enough cash to help you tackle your other debts separately.
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