With mortgage interest rates at historical lows many homeowners ask themselves whether or not they should refinance. This is assuming those homeowners have equity on their homes.
A recent article by the Wall Street Journal claims that a number of homeowners follow simplistic advice and incorrect figures when making a decision to refinance. One of this simplistic advice is the 1% rule which claims that one should refinance when the new rate is 1% lower than the current loan rate. According to the WSJ people who follow the 1% rule could have refinanced 5 or 6 times in the last 15 years paying so much fees that the savings could have disappeared, since it is important to take into consideration that refinancing would cost between 3% and 6% of the balance of the mortgage due to a number of legal and financial fees. Homeowners need to take into account a number of factors such as the time they plan to stay in their property, property taxes and how much time it would take to recover the cost of refinancing before making the decision to refinance.