With mortgage rates near rock bottom, a couple of clients have asked me if this is a good time to refinance a mortgage. These questions also prompted me to consider refinancing for my own mortgage and I ended up contacting my lender and pulling the trigger.

To determine if refinancing makes financial sense for you, there are several factors to consider but generally it makes sense if you can pay for the refinance closing costs with the monthly mortgage cost savings within a time frame of no longer than two years.

For example, the closing costs for my own recent refinance were $1250. I was able to lower my rate by .75 which represented a $77 decrease in my monthly payment. Dividing the total closing costs $1250 by $77 translates into roughly 16 months to recoup my costs. My lender also determined that I would save roughly $11,000 in interest payments over the remaining term of my mortgage. Now, my closing costs were only about .5 percent of my mortgage and this is because I was able do what my lender called a mortgage modification. I did not have do a full refinance with appraisal and title costs, so my refinance decision was a rather easy one to make.

Your situation might be more complicated, so I would suggest contacting your financial advisor and clicking on one of the below links for more information to assist you as you make your decision.

https://www.nerdwallet.com/mortgages/refinance-calculator

https://www.investopedia.com/mortgage/refinance/when-and-when-not-to-refinance-mortgage/