Recent interest rate reductions by the Federal Reserve, coupled with historically low interest rates, leads many consumers to ask if, or when, they should consider refinancing their existing mortgage loans.

For loans with an adjustable rate, or ARMs, this can be an excellent time to refinance into a 15-year or 30-year fixed rate mortgage and gain the peace of mind that comes from financial certainty.

Traditionally, the “Rule of Thumb” that says you should recover closing costs associated with a refinance within two years. But, if you wait for a better interest rate to let you recover costs faster, you may get two unintended consequences. One, lost interest savings because you waited to refinance and two, the possibility that the rate you were waiting for may not occur while you hoped for the best possible deal.

The question to answer when deciding to refinance depends on how you want to structure your financial situation and if it is worth your time and effort. One way to look at this “worth your time” factor is to simply take the lower monthly payment and divide the difference into the costs to close the refinancing deal. This will give you the number of months required to recover the closing costs.

Another way to refinance is to convert from a 30-year fixed to a 15-year fixed term. The goal is to reduce the interest cost over the life of the loan. In this case the monthly payment generally goes up, but the significant interest savings—often hundreds of thousands of dollars—are a powerful incentive.

Your professional mortgage broker can help make the decision that works best for you. If the broker is also a lender they can provide even more opportunities and access to many additional loan resources.

If you need help in making a decision, contact us and we will be happy to assist you.