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Does a New Mortgage Make Sense?

6 do's and don'ts when refinancing your home

"No matter what somebody's telling you, you need to run the numbers and see if a refinance is wise financially," says Mickelsen. "For people who've had their mortgages for 15 years or so, and they've already locked in a low rate, refinancing may not be worth their while."

A costly refinancing can also be a poor choice if you're planning to sell your home and move in just a few years.The only way to know for sure, she adds, is to do a "break even" analysis: Look at how much money you'd pay if you continued with your current mortgage versus how much you'd pay over the life of a new loan, including the closing costs.

"The numbers don't lie," Mickelsen says. They're "not just an opinion or someone else's subjective viewpoint."

And just as you should always read the terms and conditions of any credit card offer, so should you read the fine print of a new mortgage.

"You need to go beyond a lender's introductory rate, or that very attractive promotional rate, and ask yourself: 'After X number of years, if the interest rate goes to a new level, what will that mean and what kind of income will I have?'" says Hardekopf.

Consider how you'd fare if your income stopped in retirement or dropped dramatically. "If that happens when your rate increases, you could be in for a world of hurt," he says.

AARP offers a Mortgage Refinance Calculator to help you decide whether refinancing makes sense for you.

5. Don't Extend the Term of Your Loan Unnecessarily

"In my opinion, nobody over the age of 50 should be taking out a 30-year mortgage. Who would want to be paying a mortgage in their 80s?" says Tehrany, who is also managing director at Franklin First Financial, Ltd. in Melville, N.Y. "Half of the refinancing business I'm currently doing is for 15-year loans."

Instead of starting all over again with a new 30-year loan, opt for a loan with a shorter term so you can more aggressively eliminate housing debt.

This advice, of course, won't apply to everyone. "Sometimes older Americans are struggling to just pay their bills," says Mickelsen. "So if you're refinancing because you need a lower payment and if it's a choice between defaulting on a current mortgage versus taking a mortgage with a longer term, then by all means take the longer mortgage."

6. Don't Accept Surprises at the Closing Table

In years past, it wasn't uncommon for borrowers to be hit with unexpected fees and rate changes when they proceeded to settlement on their loans. These days, that doesn't happen as much, thanks to recent federal laws protecting consumers in the mortgage market.

For starters, you can now get a special statement 72 hours before closing. Known as the HUD-1 form, it contains an accounting of all the costs tied to your mortgage. You should carefully review it and compare the lender fees and expenses listed on your HUD-1 to the GFE, or Good Faith Estimate, that your lender initially gave you.

You have specific rights. "Anytime the rate on your APR changes by more than one-eighth of a percentage point, the law stipulates that a lender must redisclose that to the consumer," Tehrany says. "And they have to redisclose the loan at least three days prior to closing."

But if you don't catch something — particularly as you're signing a slew of documents during closing — you needn't worry. That's because mortgage borrowers have three days to change their minds.

"If you close on a Monday, you have the next three days — Tuesday, Wednesday and Thursday — to rescind or cancel the transaction," Mickelsen says. "So if you think something isn't how it should be, use those next few days to ask questions and investigate."

By the fifth day, Friday, the time will be up and you'll be the holder of a new mortgage.

But if you've followed these six steps, you should be able to pay it fine.

Lynnette Khalfani-Cox, The Money Coach(R), is a personal finance expert, television and radio personality, and regular contributor to AARP. You can follow her on Twitter and on Facebook.

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