The question, “Should I refinance my home mortgage?” is a question often posed by a growing number of people. We would rather hike through the Sierra Wilderness than think about refinancing our house. Home mortgages went from an all too prevalent tool applied by the finance industry to an almost extinct feature. Refinancing makes sense only after certain factors are in place to justify the costs involved in refinancing. Banks must charge you certain costs every time a mortgage loan is issued, such as an appraisal estimate of the value of your home, an inspection of your home, a clean title verification and underwriter fees.

Another question to consider is what the effective interest rates are at the time you consider refinancing. Since the recession, interest rates have been at their lowest in decades, proving that 2010 is a great time for securing very low interest rates that the US might not see again for several more decades to come. The caveat to this is that unless borrowers can qualify under today’s increasingly more difficult guidelines for obtaining a loan, then refinancing may not be an alternative. This potentially excludes many thousands of people with little money for a down payment, job history of less than two years, credit report scores less than perfect, and an income to debt ratio slightly higher than ideal. Banks have reduced substantially their exposure to bad mortgage risks and in turn left the market for home refinancing products quite bare.

It is advisable that prospective borrowers interested in refinancing their home should take the time to research all available options. Speak to your banker and read the fine print for whatever alternatives you are presented with. Ask questions and make sure to compare choices that are relevant comparisons, as well as be patient throughout the process to ensure that you don’t waste whatever limited opportunities exist in today’s market.