National news reported last week as having the lowest mortgage rates in 30 years.  Rates were slightly over 4 ½ percent.  This situation has caused home owners to relook the option of refinancing a home. As I have previously reported, one has to approach the refinance business with clear thinking.  By that I mean one has to understand the “payback” period.   It’s computed by comparing the cost to refinance with the monthly savings reflected by the lower rate.  At some point in the future, one reaches the break-even point.  If one is not planning to stay in the home until the breakeven point is reached, it may not be in the home owners’ best interest to refinance.

One argument that I have heard by owners is my lender does not charge to refinance.  Lenders do not work for free.   The cost to refinance is normally applied to the principle; thereby building the cost into the loan.  Another option is the charge a higher rate to make a profit on the backend when the loan is sold.  

My recommendation is to analyze your needs and do the math.  If you need assistance, give me a call.

This month’s podcast addresses this subject.  Go to http://www.talkrealty.com/donhavre