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According to the Bankers Association of America, refinancing loans is at a very high level and is expected to remain there for some time to come.  The reason for this is simple: lower interest rates.

Refinancing loans is most often seen in the home market, but it can also be used for other types of loans as well.  Automobile loans are probably second in line only to home refinancing.

While it is true that refinancing is often a good idea, it should not be undertaken without some research.  Before you make a commitment to refinance your mortgage or any other type of debt, do your homework and determine wheter this is in your best interest.

In home mortgage refinance, for example, there was an old rule of thumb that said refinancing was only profitable if the homeowner could reduce interest rates by at least two percentage points.

What really matters, however, is how long it will take to break even and how long you plan to stay in the home.  Here is an example:

Let us assume that you have a $200,000 30-year mortgage with an 8 percent interest rate, and that your monthly payment is $1,468.  If you were to refinance at 6 percent, the new monthly payment would be $1,199.  This saves you $269 per month.

If your new closing costs came up to $2,000, it would take eight months to break even. ($269 x 8 = $2,152). In this example, if you new you were going to stay in the home for that amount of time, the refinance would be a good idea.  However, if you knew you were going to sell the home before that time ran out, then you might want to reconsider refinancing.

Whether you are thinking of refinancing a home or another type of debt it is important to shop around for the best rates.  In many cases, the original lender may be able to offer you the lowest rates, but that is not always true.  In any case, make sure you do the math before you sign on the dotted line.  Include all of the costs associated with the refinance including closing costs and any other associated fees.  This is the only way to know what the bottom line will be.

Related News:

• Current Home Refinance Issues
  Interest rates for refinance loans are falling, and that is good news for many homeowners, but home values are also falling in some areas of the nation, and that is bad news.  In fact, this strange combination of events is causing some problems for many consumers who whis to refinance their high interest mortgage loans to lower interest loans.
• Judges and Home Loan Foreclosures
  It may be too little too late for some homeowners but Congress is currently considering legislation that would allow bankruptcy-court judges to redefine home loan terms for people who are at risk of losing their homes.