When should I refinance my mortgage?

There is a mortgage industry unwritten rule that says you shouldn't refinance unless the rate has dropped by a certain percentage (typically 1 per cent). For a more practical method I suggest that it's in your best interest to calculate your break-even point. The break-even point is the time it takes to make up in monthly savings what you paid in fees. You calculate it by dividing the mortgage fees (just the fees now, not taxes and insurance) by the monthly savings. For example, let's say you would save $100 a month by refinancing, and the closing costs would be $3,000. Your break-even point is 30 months from now: the $3,000 in fees divided by the $100 a month in savings. In this case, if you expect to continue living in the house for more than two-and-a-half years, you'll save money in the long run by refinancing. If you plan to sell the house before then, it's probably best to stick with the mortgage you have. How do you figure your monthly savings? You'll have to get an estimate of the rate you'll qualify for. Your loan officer can tell you that. Then ask the loan officer, or consult a mortgage calculator, to determine what your principal and interest would be with the new loan. Look at your payment coupon to find out what your current monthly principal and interest payments are. Your loan officer can also furnish you with a debt consolidation worksheet that will show your savings per month. By the way, you don't have to start over with a 30-year payment plan. Let's say you got a 30-year fixed loan five years ago, and you want to refinance now, but still pay off the loan twenty five years from now. That's known as amortizing the loan over 25 years. You will retire your note in the same length of time even though you are refinancing your mortgage.There are other reasons to refinance your home loan. Perhaps you want to lower your payment by increasing the length of the loan, remodel your home, take a dream vacation, or pay college expenses. Whatever the reason, refinancing your mortgage is a financial strategy that should be carefully considered. As with all financial matters be sure to do you homework and enlist the help of professionals when needed.