You might think that deciding to refinance a mortgage requires only a quick comparison of loan interest rates. Unfortunately, thats not really true. Refinancing is trickier than that! Fortunately, few useful rules of thumb can often help you make sense of refinancing opportunities.



Rule 1: Dont Ignore Total Interest Costs





You really want to use refinancing as a way to reduce the total interest cost you pay. While that sounds simple in principle, it is sometimes difficult to do. The interest costs you pay are a function of the interest rate, the loan balance, and the loan term period.



When people refinance, they tend to focus solely on the loan interest rate. But they often dont pay as much attention to the loan term or the loan balance.



When you use refinancingeven refinancing at a lower interest rateto increase your borrowing or to extend the time over which you borrow, you often arent saving money.



Rule 2: Trade Expensive Money for Cheap Money(Continue Reading...)