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  • UnderwaterHouseRefinancing your mortgage can be a tricky decision. Sure, everybody wants to save money on lower interest rates, but the cost of refinancing a mortgage can often negate the savings you make. The key is to do your research before making a decision.

    For instance, interest rates are now rising. The great deals available months ago are starting to disappear. Is it still worth your while to refinance? You can work it out yourself.

    As an example we are going to use the tools Wells Fargo offers to customers planning to refinance their mortgage. These tools are available for free at many websites.

    Basic Principles of Refinancing.

    When deciding if you should refinance your home there are at least three questions you should ask yourself:

    – How long do I want to keep the property?

    – What are the costs associated with refinancing the mortgage? This includes pre-payment penalties, surveys and  mortgage closing and processing fees.

    – What savings will I make with the new mortgage?

    Let us look at why these questions are important and what online tools we can use to improve our decision-making.

    How long do I want to keep the property?

    What state are you in? Please select an item.

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    Who is your lender? A value is required.

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    The savings you make when you refinance a mortgage are based on lower interest rates. You pay your interest annually or monthly (depending on your mortgage) so the longer you plan to keep your mortgage the greater the savings you’ll enjoy with a refinance. For instance, if you are planning to sell your home in two to five years, it is unlikely a mortgage refinance will make much sense to you, unless you are locked in a really high-interest rate mortgage.

    What are the costs?

    The costs of a mortgage refinance often decide the wisdom of opting for a refinance. There is no point in refinancing a mortgage if the penalties for paying off your current mortgage early wipe out the savings you make on your new mortgage. Ask your lender for a detailed list of all costs before choosing a refinance.

    What are the savings?

    Even small changes in your mortgage interest rate of 0.5 percent can help you save a lot money over the long run. However, depending on the time you plan to keep your mortgage and the costs associated with a refinance the savings you make may not be worth your time and energy. The online tools we are going to introduce make this entire process much easier.

    Wells Fargo Mortgage Rate Monitor. Bankrate.com and Zillow.com also offer similar tools. This program will send you updates on the current rates offered by the major banks so you know how much you could potentially save in the current refinance market. Wells Fargo’s tool obviously focuses on their own rates, but other programs will provide a wider selection of banks and lenders.

    Refinance Mortgage Tools. Wells Fargo partner Lead Fusion provides an excellent refinance mortgage tool. Other websites also offer similar tools. These calculators take into account the terms of your current and new mortgage to help you decide if refinancing your mortgage is a good idea.

    Our next article will look into how mortgage refinance calculators work and how you can use them to make good financial decisions.

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