Applied Mortgage Services

We suggest that you consider refinancing if the current rates are more than 2 percent below existing mortgage rates. But today's homeowners refinance for a variety of reasons, whether to refinance from a fixed to an adjustable rate, or vice versa, to take cash-out of the property's equity, or simply to reduce the payments or term.

There are other considerations, too, such as how long you plan to stay in the house. Most sources say that it takes at least three years to realize fully the savings from a lower interest rate, given the costs of the refinancing. (Depending on your loan amount and the particular circumstances, however, you might choose to refinance a loan that is only 1.5 percentage points higher than the current rate. You may even

find you could recoup the refinancing costs in a shorter time.)

Refinancing can be a good idea for homeowners who:

-want to get out of a high interest rate loan to take advantage oflower rates. This is a good idea only if they intend to stay in the house long enough to make the additional fees worthwhile.

-have an adjustable-rate mortgage (ARM) and want a fixed-rate loan to have the certainty of knowing exactly what the mortgage payment will be for the life of the loan.

-want to convert to an ARM with a lower interest rate or more protective features (such as a better rate and payment caps) than the ARM they currently have.

-want to build up equity more quickly by converting to a loan with a shorter term.

-want to draw on the equity built up in their house to get cash for a major purchase or for their children's education.