Does it Pay for me to Refinance my House?

Does it pay for me to refinance my house? Well, in many ways this is very easy for you to determine, but because people refinance for many different reasons we'll have to look at some of those.

Does it pay to refinance my house if...

I'm getting a lower interest rate. This is pretty straight forward to figure out really. The rule of thumb is to do it if you can find a two percent lower interest rate. This can be done because the overall market has dropped, or you have improved your credit score. Refinancing does come with a large upfront cost, so to be sure it's worth it you should calculate the upfront costs with the money you hope to save. Most don't realize the benefits for three years so if you won't be staying in the house that long it probably won't be worth it for you. Also, if you're lowering your interest, but lengthening the loan terms it probably won't pay off.

I'm freeing up money for a home improvement project. Yes, probably. I'm assuming you've done that math and whatever you are doing will add value to your house that will make it worth it, and your house payments being low interest and tax deductible is a nice little bonus for that.

I'm consolidating my high interest debts. Yes, this will probably pay off nicely, but there are some things to consider. In terms of the debt this is fantastic. If you have high interest debt over $10,000 you will experience a drastically lower interest rate, plus your home payments are tax deductible! The downside is that it will take longer to pay off your mortgage, and if you overestimate what you'll be able to pay on a monthly budget and end up missing payments you could lose your house. However, if you're sure you will be able to make payments, and extending your mortgage doesn't bother you, this can be a great solution to unmanageable high interest debt.

There is lots of math to consider here, but once you have the numbers the answer should be clear. Does it pay for me to refinance my house? As long as you consider everything I've mentioned for your situation, then it probably will.

If you still want to know more check out How Does Refinancing Work? for more helpful information, including explanations for refinancing a mortgage and the pros and cons of refinancing.