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    When to Refinance Your Mortgage

    There are two common reasons to refinance a mortgage, according to Kuba Jewgieniew. They are to save money or to get cash from your home’s equity.

    If interest rates have dropped, it may be a good idea to refinance your mortgage. But there are costs associated with refinancing so you need to calculate the point where you will break even. That means knowing how long it will take to save enough money on the refinance to cover the costs you paid at closing. Let’s say you will save $50 per month. If closing costs are $2,000, it will take you 40 months, or just over 3 years, to recoup the $2,000. If you do not plan on staying in your home for more than 3 years, refinancing may not be a good idea. If this seems complicated, ask for help at Realty ONE Group, where the staff will be happy to run the numbers.

    Getting cash is another reason to refinance. You may want to pay down high-interest credit card debt. On the surface, this seems like a great idea. But, again, you need to run the numbers. How much additional interest will you pay over the term of the new mortgage? And how much interest will you pay if you just continue paying down the credit card debt? Will you really save money by refinancing, especially when you consider closing costs? Plus, if you miss a couple of credit card payments, you will get some nasty telephone calls. If you miss mortgage payments, you could end up with a house in foreclosure.