1.      Calculate the total cost of the refinance––example: $2,000

2.      Calculate the monthly savings––example: $100/month

Ø       Divide the result in 1 by the result in 2––in this case 2000/100 = 20 months. This shows the break-even time. If you plan to live in the house for longer than this period of time, it makes sense to refinance.

The most common reason for refinancing is to save money. Saving money through refinancing can be achieved in two ways:

People also refinance to convert their adjustable loan to a fixed loan. The main reason behind this type of refinance is to obtain the stability and the security of a fixed loan. Fixed loans are very popular when interest rates are low, whereas adjustable loans tend to be more popular when rates are higher. When rates are low, homeowners refinance to lock in low rates. When rates are high, homeowners prefer adjustable loans to obtain lower payments.

A third reason why homeowners refinance is to consolidate debt and replace high-interest loans with a low-rate mortgage. The loans being consolidated may include second mortgages, credit lines, student loans, credit cards, etc. In many cases, debt consolidation results in tax savings, since consumers loans are not tax deductible, while a mortgage loan is tax deductible.

Sometimes, you do not have a choice––you are forced to refinance. This happens when you have a loan with a balloon provision, but with no conversion option. In this case it is best to refinance a few months before the balloon comes due.

Whatever you choose to do, consulting with your Oxford Wellington mortgage specialist can often save you time and money. We will help you to understand the options available to you.

When rates fall steadily, refinancing may make sense even if you have done so once already.

If you are considering a second refinancing, don't overlook the potential tax write-off when paying points to refinance. You have to deduct the amount of the points over the term of the loan, usually 30 years. But when you refinance a second time, all of the points that have not yet been deducted from the first refinancing can be written off in a lump sum.