Time to jump on the refinancing bandwagon?

	If you bought your home when mortgage interest rates were high, watch for rates to drop; that may be a good time to refinance.

Mortgage rates rise and fall. If you bought your home during a period when mortgage rates were high, you should watch for the rates to come down; that may be a good time to refinance. By refinancing, you may be able to reduce your monthly mortgage payments and free up some extra cash. So, when should you go shopping for a new loan? It depends on your situation.

Important questions to consider
How long do you expect to stay in your current home? If you're likely to be transferred or if you expect to switch jobs and move in the next year or two, you probably won't have time to recoup the additional costs of refinancing.

Do you currently have an adjustable-rate mortgage (ARM)? Perhaps you took out an ARM because the initial rate was affordable. But you could be facing much higher payments in the future when the rate adjusts. When fixed-rate mortgages are at lower levels, consider locking in a fixed rate and gaining some peace of mind.

Do you want to be debt-free faster? If you have more than 15 years left of a 30-year mortgage, consider refinancing with a 15-year mortgage. Depending on the difference between your old/new rates, your new payments may be higher, lower, or the same. But you'll reduce your mortgage faster and pay less interest over the years.

Refinancing options
Conventional wisdom says you should refinance only if your new mortgage rate is 2 or more percentage points lower than your existing rate. But conventional wisdom may be out of date! Refinancing packages now come in all shapes and sizes, and you can often negotiate with mortgage companies to reduce the costs of refinancing.

For example, lenders generally offer a range of interest rates with different points. One point equals 1 percent of the loan amount, so try to get the lowest rate for the least amount of points. Some lenders offer no-point loans, but generally charge higher rates. Refinancing expenses also include numerous fees and closing costs, and you may be able to get some of these waived. Another option is to roll the closing costs into your new mortgage. This will reduce your up-front out-of-pocket expenses.

With so many options available, even if your rate change is only 1 percentage point, you may still come out ahead in the long run by refinancing. The only way to determine whether you'll save money is to look at your individual situation, shop around for several quotes, and run the numbers.

The above article is for general information only and is not intended to provide specific advice or recommendations for any individual. Consult your attorney, accountant, or financial or tax advisor with regard to your individual situation. © Mutual of America Life Insurance Company March 2002. All rights reserved.

Mutual of America Life Insurance Company is a Registered Broker-Dealer.