What You Should Know Before You Refinance Your Mortgage

It all depends on three factors on a sliding scale:
1. How much you can reduce your interest rate.
2. How much you’ll pay in closing costs.
3. How long you plan to live in the home.
The real key is the break-even point. That’s the number of months you should plan to keep the home after refinancing in order to recover your closing costs. For example, if you pay $3,000 in closing costs and you manage to lower your mortgage payments by $150 a month, you would reach the break-even point in 20 months. As long as you plan to live in the home longer than that, refinancing could be worthwhile. It’s a sliding scale. The smaller your savings, the longer you need to stay put.
There are a couple strategies to tweak the sliding scale by minimizing the price of closing costs when you refinance.
1. Ask your current lender to refinance you. In order to keep your business, your lender may be willing to waive certain closing costs.
2. Ask for the "reissue rate" on your title insurance, a savings of 40 to 50 percent.
3. Ask for an automated or drive-by appraisal, which is cheaper than a full-fledged one.
4. Get your lender to skip the credit check. After all, the company is intimately familiar with your payment record.