The Two Point Home Mortgage Refinance Rule

Article Posted by Expert Author: Tony Caro  on 04/08/2013

Questions will frequently arise regarding what would be the minimum amount of interest points a new mortgage should present in order for you to refinance. A common suggestion is that a borrower should only accept a new mortgage if it is two points lower than the rate of the current mortgage. While procuring new mortgage that is two points lower is definitely a good thing, the homeowner should not be under the impression that a two point reduction is mandatory. Any serious San Jose refinance home mortgage professional will tell you exactly this. Refinancing to a new amount that is 1.5% less, for example, could prove to be a perfect new loan rate to acquire. Ultimately, the value of the amount of the reduction in the new mortgage to the homeowner will depend on individual circumstances such as need for a much lower rate, the amount of time one intends to stay in the home, and other factors. While 2% is a good rate drop, it is not mandatory when seeking to refinance.


Other scenarios that may make sense would be a 1% or less drop combined with a lower payment schedule.  For instance, you may be able to drop 5 or 6 years off your loan if you refinance home mortgage at a slightly lower rate, but shave years of interest payments off the entire loan.  And - your monthly payment may remain the same for your efforts.


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