With mortgage interest rates trending low, many homeowners are interested in refinancing. However, there are some key considerations in determining if this is the right option for you:

• Your credit score: Your credit history will affect the rate you qualify for, so the rate offered to you may not be as desirable as what you see advertised. You should be prepared to supply a variety of financial documents and information to your lender as they determine your rate.
• Your goals: Is your goal to save money in interest, reduce your payments, or both? Due to the long-term nature of mortgage loans, even a small reduction in your rate can equate to significant savings in interest over time. If you need to reduce your payment, it may be tempting to extend your loan term; however, this might not be the most financially sound decision as it will likely cost you more in interest long-term.
• Your closing costs: Refinancing generally involves closing costs, so any potential interest savings should be weighed against those closing costs. The longer you stay in your home the more refinancing to a lower rate may save you, whereas moving in a year or two may negate the benefits of refinancing due to the upfront closing costs involved.

If after considering the details above you feel you could benefit from refinancing your mortgage, you should get in touch with a mortgage broker or professional who can help you fine tune your options.

For more information and examples on refinancing a mortgage, check out Marsh and McLennan Agency’s Financial Literacy 101 Guide.