With interest rates dropping, many homeowners are wondering if refinancing  their mortgage makes sense.   Many people are taking advantage of historically low mortgage rates for new purchases and refinancing.  The refi boom is expected to push total mortgage originations to $2.78 trillion in 2009, which would be the fourth-highest total on record. Refinancings would account for 69% of those mortgages. My assistant refinanced his home last week for a crazy low rate of 4.8% with Steve Tetzner from Homestar Mortgage.  He had been listening to Steve and I talk about rates, and even though he had a great 6% rate, as they continued to fall, he got all his ducks in a row so he and Steve were ready when the rate hit his target number, he is now  saving almost three hundred dollars a month

To figure out whether it’s in your best interest to refinance, you need to calculate your break-even point:  or how long it will take to make up your closing costs. You calculate the break even point by dividing closing costs by the monthly savings.  If your mortgage payment is $200 a month lower after refinancing, and the closing costs are $4,000, your break-even point is 20 months.  In this case, if you expect to live in the house for more than two years, you’ll save money by refinancing. If you plan to sell the house sooner, you should stay in your present financing.

This Week’s Real Estate Insight:

Your own financial situation will dictate when it’s time to refinance, there are many factors surrounding refinancing, including the amount of equity you have in your home, lenders are looking very closely at the Loan to Value ratio, and appraisers are being very conservative in their values.