Is refinancing worth it?

Refinancing is always an option, but it does not always make good financial sense for everyone.

When does refinancing make sense?

This answer depends on how long it will take you to get back the money you spend on refinance costs with the savings in your monthly payments.

To figure this out you need to know your current rate and the rate at which you would refinance. There is a "two-point" guideline that has been the main school of thought for a long time. It assumes that refinancing becomes worthwhile if your refinance rate is at least 2 percentage points below your current rate. This may be an acceptable starting point, but don't use this as your steadfast rule.

Virtually all refinances at a lower rate will pay for your refinance costs eventually. The questions become:

• How soon do you want to realize this savings?
• Will you realize these savings before you expect to purchase another home?

If you expect to live in your home for another three to five years, the two-point rule generally works in your favor: your monthly savings will generally offset the costs of your refinance within three to five years. Depending upon your situation, you may be able to refinance with less than 2 percentage points and realize your savings in an acceptable time frame.

If you plan to stay in your property for a shorter period, or if it will take significantly longer to recognize your monthly savings, you may want to seek other options.

You may also want to evaluate how many years will be added to your mortgage payments. You may not want to add another 10 or 15 years to your mortgage payments if you only have 10 years remaining.

How much can I expect in refinancing costs?

Refinancing costs are very much like the costs paid for your original mortgage. These costs may include but are not limited to:

• Application fee
• Appraisal fee
• Survey costs
• Hazard insurance
• Attorney/legal fees
• Title search
• Mortgage insurance
• Loan origination fees
• Title insurance fees
• Home inspection fees
• Discount points
• Credit report fee

The sum of these fees could cost you up to 2 to 5 percent of the loan amount, depending on your property location. But there are options available to deal with these costs. Contact a participating bank agent in your area or call toll-free 1-877-SF4-BANK / 1-877-734-2265 for more information.

This information is intended to help you ask the right questions when considering a possible refinancing of your loan. Contact a participating bank agent in your area or call toll-free, 1-877-SF4-BANK / 1-877-734-2265 before you commit to any specific loan.