The equity in your home is not always easy to tap in a financial emergency. If you lose your job or face sudden expenses, it can be difficult to get a home equity loan. That's because of the benefit of tax-deferred compounding and the fact that many employers match at least part of employees' contributions. Be certain your mortgage does not carry prepayment penalties. While the savings of prepayments may outweigh the cost of any penalties, such penalties are a nuisance and more lenders are charging them today to discourage borrowers from refinancing.
Some lenders waive closing costs but then charge a higher interest rate.
If you pay closing costs, you must be able to recoup them through the savings on your lower interest rate. Don't look at the savings over the life of the loan if you will only be in the house a few more years. Again, when you're calculating savings, make sure you take into account how long you'll live in the house, not just the difference in the monthly payment. Netfolio Insights features the opinions of many different experts. Inc. The articles are not a substitute for individualized professional advice when investing, managing or spending your money.