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With rates trending upward after reaching historic lows, refinancing may seem like a terrible idea. Well, that all depends on what you’re trying to accomplish. Even if mortgage rates aren’t at rock bottom, they’re still quite good if you take a look at the double-digits they used to be “back in the day.” And when comparing your borrowing options between credit cards and other types of loans, refinancing may still be the preferred choice.

The specific reasons vary, but generally people refinance to save money. Perhaps it’s by obtaining a lower interest rate or by reducing the repayment term (how many years it will take to pay back) on your home loan. Maybe you’re looking to consolidate debts into a better rate than offered by credit cards. You might refinance to convert an adjustable loan rate to a fixed loan rate.

There are fees involved in a refinance, so you’re going to want to take a look at three elements to make sure that you’re making a good investment decision.

Here is a quick calculation:

                                 Total Cost of the Refinance

                    --------------------------------------------------------------            =           Break Even

                         How Much You’ll Save (monthly)

 

Divide the total cost of the refinance by the amount you would save per month. This will tell you how long you’d need to live in your home in order to "break even."  If you own the house longer than this then each month after that, you’re saving money.

Determining if refinancing is the right choice for you can seem complicated, since there are many factors to consider, but that’s why it’s important to have a trusted resource for your questions. Do the math and reach out to your loan officer. They’ll be happy to help.