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The very first thing you need to remember is to refinance at a lower cost, however not just because you can find a deal that offers lower interest rates means you’ll end up saving money.

A very good example of a lower interest rate deal that could go sour are adjustable rate mortgages (ARM). Like I mentioned in the previous post you cannot protect yourself from rising interest rates with this deal. In fact with ARMs interest rates usually change just within 6 months. Because of this, if you will still be paying for your mortgage for several years once you might end up paying for a higher interest than you are doing at the moment.

Another way you can end up having a bad deal even with lower interest rates is if you do not compute for the actual refinancing cost. When considering refinancing your loan you should consider the fees you need to pay and add them up. Compare this amount with the total amount you’ll be saving due to the lower interest. You might be surprised that the amount you will end up saving might be too little to be worth the bother or even negative, meaning you’ll end up spending more money!

When computing for the actual cost consider the following fees:

1. closing fees - paid to your current lender
2. appraisal fees - to new lender
3. loan fees
4. origination fees
5. title insurance

Ask your prospective lender for their complete list of fees just to make sure!

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