Who should consider refinancing?
The general rule of thumb is, refinance if your mortgage rate is about 2 percent higher than market rate because the savings will in time cover the closing fees. For a $500,000 mortgage, which is not uncommon on Long Island, the closing costs are about $4,000 to $5,000. There are several factors to consider, including the amount you want to borrow and how long you plan to live in the home.
Borrowers whose adjustable rate mortgages will reset to at least 7 percent within 12 months should consider refinancing, said Emmett Laffey, chief executive of the Greenvale-based First Allied Mortgage Bankers and Laffey Associates, a real estate agency. "The break-even point might be five to six years if you figure in the closing costs," he said.
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