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Refinancing isn't a no-brainer

Sure, you could refinance your mortgage. But should you?

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The answer depends primarily on your personal circumstances, including the interest rate and terms of your current mortgage, and how long you expect to continue to own your home.

But beyond those and other individual issues, there are also some broader considerations that might help you figure out whether to refinance or stand pat.

Rates drop, applications rise
There's no question that mortgage rates have fallen since the beginning of the year, causing mortgage refinancing to build momentum quickly. In the week that ended Jan. 18 the Mortgage Bankers Association's index of applications to refinance existing mortgage jumped almost 17 percent compared with the prior week, and the share of refinance activity as a percentage of total loan applications increased to 66 percent, a week-over-week rise of 4 percent. Both the volume of applications and the share of applications that were to refinance had increased in the prior week-to-week comparisons as well.

Unlike prior refinancing booms, however, the current flurry of activity isn't just about low interest rates. Many borrowers want to replace an adjustable-rate mortgage with a less risky fixed-rate product, according to Doug Duncan, chief economist of the MBA, who noted this trend in a Jan. 24 podcast posted on the association's Web site.

Possible reasons to refinance
Get a lower interest rate.
Replace an ARM with fixed-rate loan.
Consolidate loans to one monthly payment.

"We have seen a dramatic pickup in refinance activity for those households who have good credit and are in markets with stable house prices, many of them shifting from adjustable-rate mortgages to fixed-rate mortgages and stabilizing that sector of the homeowner population," Duncan says.

Next: "The current downward direction of interest rates ..."
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Compare today's rates
30 yr fixed mtg 4.19%
15 yr fixed mtg 3.23%
5/1 ARM 3.34%
Rates may include points
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  Fixed or adjustable rate: Which is right for you?  
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