Years ago, when people considered refinancing they always looked to make sure that they would save at least 2 percent on an interest rate or they would not refinance. Well, that was easy back then considering the rates of the mid '80s and how much they dropped, but the rules have changed.
These days, because of the volatility of the markets and the variety of home loan products that have been offered over the years, a consumer's choices, needs and wants have changed. Being that each loan scenario is different, each consumer's needs and wants are different in what they are looking to accomplish with a refinance. Toss in the addtional quirk of home values and it makes for an interesting marketplace for refinancing.
Most refinance to drop their interest rate or the term of their mortgage, and some even do it to pay off debt... and of course there are those that do all of these at once. But the cost and benefits must be looked at when refinancing to make sure that it makes sense. If the loan officer does not do this with the potential borrower then they are not doing their job. What are the short-term costs and benefits? Long-term? Overall advantages? Disadvantages? How quick is the break-even point? These and other questions need to be examined when refinancing, and the loan officer should be more then willing to go over them with you. In some cases it won't make sense to refinance.
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Today's consumer has become more aware and educated, and the loan programs are still as basic as they always were. It is just that the markets and the economy have set some limitations to what can and cannot be done. So make sure if you are refinancing to get your questions answered; you should feel comfortable with the person you are working with. If you are not sure if you should or could refinance, check out your options—you may be surprised.
