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When to Refinance

Should You Refinance and When to Refinance

Most of the home owners, who take the refinancing route, do so because they want to save money on their monthly payments, however, as a homeowner you must do your math or you might be trading one loan for another without any benefit or advantage whatsoever.

Why Should I Refinance?

This is the first question that you must answer. Before you sign up for a refinance loan add up all the association cost of the new loans like fees, points, attorney, credit report and a host of others. If the loan is still found cheaper your must go for it.

Also remember that you should also subtract the cost of the tax from the net savings; a low interest loan does not give you as much benefit as a high interest loan. You must also calculate your break even point and must calculate the amount of time required to pay off the cost as a result of refinancing. An important factor that would help you decide on the question of should I refinance my house or not, is the hidden cost angle

There are times when some lending companies have a prepayment penalty attached to their home loans and this must also be taken into consideration during the final calculation. Only when you are aware of all the facts and figures and their addition or subtraction proves beneficial to you, must you take the route of refinance.

When to Refinance?

This is yet another question that should be answered before you step into the world of refinancing. There is always a right time for everything and you can answer questions like ‘should I refinance my house?’ etc only if you know when to refinance.

If you go by conventional wisdom you should take into consideration the prevailing market rates at that point of time. The market rates, experts suggest, must be at least two percent below the original mortgage rates. The difference in this regard will help you calculate the break even period and thus help you pick the right time as to when to refinance.

There are some enterprising financiers who might ask you to make use of even 1% difference in the rate of interest. Herein, if the principal of the earlier loan amount is high, it would make sense to go for the refinance option offering the lower interest rate

When to Refinance and ARM

Your financial situation at a particular period of time also will determine the time of refinance. If you hold an adjustable rate of mortgage and you realize that the your long term income prospects wont be as successful as you thought they would be, you might just try and start answering the question, ‘should I refinance my house’? This is one of the scenarios where in you can refinance. The time in this case is just right.

Another great time for refinancing is when you want to build up your equity in your home, as soon as possible, and you want to own it in double quick time.

As can be seen, the answer to the questions “when to refinance” and “should I refinance” will help you make the right choice as to whether to go for refinancing or not.

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