The term “layoff” has become all too familiar in this economic season but it is actually a good reminder to us of things we may want to layoff ourselves - namely some of our bills.  Regardless of your personal situation, it is a good idea to sit down once a year and examine your bills (fixed or regularly recurring expenses) such as insurance, utilities, etc.  With a few phone calls or web inquires, you will likely find opportunity for savings and in some cases it may be significant.  Start with your largest bill first and ask yourself, “Is there a way to reduce this?”  With utilities there may be other providers you have not considered, or other options such as phone service now being offered by many of the cable companies.  By going through this exercise, some people have realized they don’t even need a home phone and have chosen to use cell phones exclusively.  However, there are some considerations with that decision as 911 service in an emergency could be delayed while they pinpoint your location, and the pizza company may not deliver.

In going through this exercise you might even have some fun as you begin to add up the savings.

For people who maintain healthy savings account balances and for those dependent upon fixed income investments and deposit account withdrawals, low interest rates are discouraging.  However, if you have mortgage debt, low interest rates can provide great opportunity.  Right now if you are paying over 6% for a mortgage loan there is a good chance you can save money by refinancing.  Every situation is unique, so you have to do your homework, but you may find an opportunity to lower both your monthly payment and the total interest paid over the life of the loan.  On the Bankrate.com website you can find general mortgage information and rates as well as a calculator to help you determine if you should refinance.

It is important to identify and minimize the transaction costs of refinancing.  Generally, they all fall into three categories:

1. Prepaid expenses are applied to your escrow account for homeowners insurance and taxes.  Typically there is a balance in your current escrow account at closing with your prior lender, and you will receive a refund.  This refund will offset your out-of-pocket prepaid expenses with the new lender.

2. Closing costs are fees you will pay as part of a standard closing that go towards local taxes, title insurance, attorney fess, etc.  Don’t be afraid to question and negotiate these expenses.

3. Lender fees are everything else not included in the above two categories and include origination fees, document prep fees, processing fees, etc.  You have to be careful with these as the lender may say there is no cost, but when you add up some of the “administrative” fees the number might shock you.  Carefully examine the Good Faith Estimate (GFE) for a list of these costs.  Also, check on these costs at closing as they could change from the original GFE.

By sorting all the costs into these three categories, you are more likely to make an apples-to-apples comparison between lenders.  When you begin looking for a lender to refinance, it is always good to start with your current mortgage company because they may offer to refinance your loan with a reduced amount of paperwork and expense.  Also, consider credit unions as a potential source for a mortgage refinance.

Lastly, don’t forget to examine other debts for possible reductions in interest cost.  If you have good credit you may find a different credit card or home equity loan can be found with lower interest costs.