It is often said that you should refinance when mortgage rates are 2% lower than the rate you currently have on your loan. A refinance home loan may be a viable option, even if the interest rate difference is less than 2%. A modest reduction in the loan rate can still trim your monthly payment. For example, the monthly payment (excluding taxes & insurance) would be about $770 on a $100,000 loan at 8.5%. If the rate were lowered to 7.5%, the monthly payment would be about $700, a savings of $70. The significance of such savings in any option will depend on your income, budget, loan amount and the change in interest rate. Trust your lender to help calculate the different options.

It is often said that you should refinance when mortgage rates are 2% lower than the rate you currently have on your loan. A refinance home loan may be a viable option, even if the interest rate difference is less than 2%. A modest reduction in the loan rate can still trim your monthly payment. For example, the monthly payment (excluding taxes & insurance) would be about $770 on a $100,000 loan at 8.5%. If the rate were lowered to 7.5%, the monthly payment would be about $700, a savings of $70. The significance of such savings in any option will depend on your income, budget, loan amount and the change in interest rate. Trust your lender to help calculate the different options.

In most cases, you will need at least some cash for closing FHA and VA loans. Although most lenders will allow you to roll-in certain closing costs into the new refinance home loan. If the value of your home is staying the same or increasing you may be able to increase your equity more quickly with a lower interest rate on a refinance home loan. If the value of your home is decreasing, it may not be a good idea to throw good money after bad for closing costs when your equity position may well be eroding.

Read more on refinancing

When Should You Refinance?

Equity

Caution