What Will Be My New Rate?

• One of the first questions you should ask when you are considering a mortgage refinancing is regarding your new interest rate. Ideally your interest rate should be fixed and the same or lower than what you had before. In some cases, you could be offered cash-back on the refinancing, but the trade-off is a higher interest rate that could cost you many thousands of dollars over the course of the loan.
  
  

What Will I Get Back?

• The next question to ask is the estimated net of what you will be receiving back in cash once the refinancing is complete. This is especially important to know when you plan to pay off bills or credit card debt when you refinance. Keep in mind that there are closing costs and other fees that will be associated with this new loan, so it is not a simple matter of subtracting the balance of your current loan from your home value to get your cash-out figure. You must also factor in those other loan fees. In most cases, you will only be eligible for a cash out if you have more than 10 percent equity in your home that can be proved with a professional appraisal.
  
  

What Are My Closing Costs?

• Once you know your cash-back amount, you still have to dig deeper. Be informed about how much you are going to be paying in closing costs, which includes lender fees, the appraisal, insurance, title search and other costs (see "References" for a complete list). Ask for a breakdown---not just an overall figure. There may be some fees that escape your notice.
  
  

How Much Money Am I Saving with This New Loan Over Time?

• Next, you need to ask your lender exactly how much you will be saving (if anything) if you refinance over the course of the entire loan. For example, if your previous interest rate was 10 percent on a $100,000 loan for 30 years you would pay a little more than $215,925 in interest at about $880 per month. If you refinance within the year and this new loan will give you a seven percent rate (assuming no cash-back), you will pay about $139,000 over the course of the loan and pay about $660 per month. This new loan would save you more than $75,000 in interest costs, and you'll be paying $200 less each month.
  
  Be sure to factor in the upfront costs that you will have to pay to complete the mortgage refinancing as well. In this hypothetical case, even if you have to pay $3,000 in closing costs right now, you are still netting more than $70,000 over the life of the loan (assuming you stay put for the full 30 years). See "Resources" for an easy-to-use mortgage refinancing calculator.