Interest rates have been riding historic lows recently. Predictably, a huge number of homeowners have taken advantage of the equity afforded them by sometimes-double-digit property value appreciation rates to refinance and extract cash in the process. Many have further taken advantage to switch 30-year mortgages to 15- or 20-year notes, lopping years and the concurrent interest off the books.
If you haven’t already, should you follow suit? Answer these questions first:
Have you lived there long enough? If you’ve been in your house less than two years and put an average amount down, chances are you don’t have enough equity in your home to make a refi worth it. You probably got a pretty good interest rate when you bought the place, and if you’re looking to get cash out, you likely can’t (banks can’t let you refinance for more than 80 percent of your home’s fair-market value).
Is your interest rate really that high? Rates have been so low for so long, chances are that the current rates, which have been on the rise the past month, aren’t low enough to bother compared to the rate you already have.
Are you going to move soon? If you’re planning to move in the next year or two, you probably want to take a pass on a refi, unless you want to shorten the life of your mortgage or you need cash out to pay for an urgent expense (say, a plumbing bill or badly-needed remodel).