A Common Mortgage Mistake

As i hear common mistakes from borrowers i will try to post them on here so that you don't have to make the same mistake. Today i was talking to someone and they were asking about refinancing. They said that they were told and thought that it is not worth it to refinance your house unless you lower your interest rate by 1% or more. If it were only that simply... I know of times that i could have lowered someones interest rate 3% and it wasn't the right thing to do, and other times that we lowered their interest rate .125% and it WAS the right thing to do.

So how do you know????

there is one major issue that you are not considering in just looking at the interest rate. That is the fees that you have to pay to do the loan. If we can lower your interest rate 3% saving you $200 a month, but it cost you $20,000 in fees to do that. It probably isn't a good idea. But say we can save you .125% or $15 a month but we can do it on a no cost loan. Then you save money from the very first month.

There are a few other small things to consider after looking into the two big ones (rate and fees) and those are how long are you planning on keeping that mortgage? If you are going to pay fees to lower your interest rate, do you think rates are going to go down even more? And do you care about the lost time of payments that you have already made? These are minor compared to the rates and fees but are something that you should consider.