When Does It Make Sense to Refinance Your Mortgage?

Refinancing a mortgage simply means replacing your existing loan with a new one, on better terms. It can save tens of thousands of shekels - but it's not always worthwhile.

When it's worth checking

• Market rates have dropped since you took the loan
• Your financial position has improved - higher income, better credit rating
• The monthly payment is burdensome and you need breathing room
• A sum of money came in and you want to shorten the period
• It's been a few years and you haven't checked at all

What you actually check

It's not enough that the rate dropped. You need to calculate:

1. Early-repayment penalty - how much it will cost to close the existing loan
2. Refinancing costs - appraisal, file opening, registration
3. The total new cost vs. the old one - over the whole period

If the total savings are significantly greater than the costs - it's worth it.

The big trap

A refinance that lowers the monthly payment but extends the period can look great and cost you more overall. Always compare total cost, not just the monthly payment.

How long it takes

A refinancing process usually takes a few weeks. The check itself - whether it's even worthwhile - is a matter of a single meeting.