When you're making your decision,
there are several things in mind:
First, even a small rate cut can pay off quickly. That's because
you can easily find mortgage companies willing to waive routine
refinancing charges such as application, appraisal and legal
fees (which can add up to $1,500 to $3,000). Of course, in
exchange for low or no up-front costs, you'll have to be willing
to accept a rate that's somewhat higher than the prevailing rock
bottom.Second, if you are planning to stay in your home for at least
three to five years, it may make sense to pay "points" (a point
equals 1% of the loan amount) and closing costs to get the
lowest available rate.
And third, you can avoid laying out cash and still get a low
rate by adding the points and closing costs to your new
mortgage. Does that mean shouldering a lot of extra debt? Not
necessarily. If you've had your current mortgage for at least
three years, you've probably reduced your balance by several
thousand dollars. So you may be able to tack your closing costs
onto your new loan and still end up with a mortgage that's
smaller than your original one - plus, of course, a lower rate
and lower monthly payment.
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