Should I refinance my mortgage?

If you're one of those people, here are some things for you to think about on the road to your decision – to refinance … or not to refinance.

Reasons to refinance

• Lock in lower interest rate: Reduce monthly payments
• Shorten mortgage term: Quicker loan payoff
• Switch from adjustable- rate to fixed-rate mortgage: Make finances more predictable

Refinancing expenses

• Closing costs: Generally from 2% to 3% of the amount being refinanced
• Prepayment penalty: Does your current loan contain this charge? If yes, that amount will be added to the closing costs of your new loan
• Do some research: Will refinancing, in the long run, save you money, or even recover your refinancing expenses?

Do the math

Here's a hypothetical example showing the time period before recovering refinancing expenses.

According to this example …

• If you are planning to sell your property within 2½ years, the cost of refinancing outweighs the savings - so refinancing is probably not a good idea.
• If you're holding on to this property for the long run, you should consider refinancing.

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