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    When to know if you need to refinance a mortgage

    In some cases, refinancing a mortgage is done to lower payments by extending the time that the loan will exist.

    For example, you might have a 15-year loan that is a couple of years old and are having trouble with the amount of the payments.  You could refinance (and hopefully with a lower interest rate) to a 30-year loan and expect your payments to drop significantly.  However, you will be making payments for much longer.

    Related: When a simple IRA make sense for your practice

    A more common motivation to refinance a mortgage is to reduce the rate of interest paid on the loan.

    Refinancing for this reason was common until recently, as mortgage rates ranged from only 2% to 4% since around 2009. 

    Dropping interest payments over a long mortgage can save tens of thousands of dollars.

    However, refinancing is not free.  Most of the time, this process takes time, paperwork and $2,000 to $5,0000 in various fees. There are certain instances in which refinancing a mortgage may not make sense. One time is during the last five years or so of a typical 15- to 30-year mortgage.

    Next: When interest payments change is very small

    Steven Podnos MD, CFP
    Steven Podnos, MD, CFP, is the principal of Wealth Care, LLC in Merritt Island, Florida.


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