As mortgage interest rates are declining, the question everyone is asking is "Does it pay for me to refinance?" To answer this question, you should evaluate the benefits of refinancing your home mortgage with the ability to recoup your refinancing costs over a two to three year period of time. Based on this, if you plan to move out of your house within the next few years, you will want to carefully evaluate the savings, if any, involved in refinancing. If you fail to recoup your refinancing costs before you move and pay off your loan, then there has essentially been no savings to you.

First, you will need to determine the annual payments of principal and interest under your existing mortgage and under the terms of the refinance for approximately three to four years. Once, you have determined your total payment under each mortgage you will want to determine the difference between the annual payments. The annual difference amount will then need to be compared to your costs incurred at the time of refinancing.

For example, if your refinancing costs are$2,500 and your annual savings under the terms of your new loan is $ 1,250 then you will recover your refinancing costs in two years. Based on this example, unless you plan on staying in your home for more than two years, it would not be advisable to refinance as you would not benefit from the annual savings. After the two years, the savings which you incur under the new loan is money in your pocket. Given the terms of the new loan and refinancing cost, the time in which you recoup your costs to refinance will vary.

Good financial planning requires careful evaluation of liabilities as well as investments since in most cases a reduction in loan costs provides more financial rewards than an increase in returns.

Finally, when refinancing, you may also be able to save on title insurance which is part of the refinancing costs by obtaining your lender's insurance coverage at its reissue rate. You may possibly obtain an additional discount on the title insurance cost if you have purchased your home or refinanced within the last three-years and you are procuring title insurance from the same title insurance company.

For more information on refinancing and title insurance, contact Reager & Adler, PC at 763-1383.