Get to Know When to and When Not to Refinance Home Mortgage


Should I Refinance My Home

It is worthwhile to consider refinancing if you want to save some money on your home mortgage, want lower interest rate or want to move from adjustable- rate mortgage to fixed rate mortgage. Most importantly, refinance your mortgage if you have plans to stay in your home for a while.

Having said that there are few other things to think through such as prepayment penalty with your current lender; the amount of equity in your home; the difference between the interest rates then and now; number of years you plan to stay in your home, etc. before you take the big decision of refinancing home loan. If not, you might end up swapping one loan with the other without any apparent benefit or value.

When to Refinance Home Loan?

As a home owner, you must ensure that refinancing will help you meet your financial objectives. Therefore, another question that should be addressed before you step into the world of refinancing is "when should you refinance your home?". Conventional wisdom says you should take into consideration the prevailing market rates at that point of time. As per the mortgage refinance experts, the market rates must be at least two percent below the original mortgage rates. Thus, the difference between the rates should help you calculate the breakeven period and also assist you decide the right time to refinance your home.

Home mortgage refinance makes sense when you want to move out of an adjustable- rate mortgage or to do away with a second mortgage loan. When your adjustable rate loan is bound to readjust to a high interest rate, you can switch to a fixed-rate loan and take advantage of lower rates, if mortgage rates are falling.

Home refinancing, especially a cash-out refinance, can serve as great tool for debt consolidation if you have multiple debts such as medical bills, credit card debt or other obligations. By refinancing your loan, you can consolidate all these multiple loans or debts into a single loan with a single monthly payment that is more affordable.

Although not that widely- held reason, refinancing is a best thing to do if you are looking to pay off your home mortgage faster. For example, mortgage refinance allows you to pay off a loan in 15 years instead for another 25 years. While you are required to pay a higher amount towards monthly payment, you may wind up paying out relatively less over the loan term.

Understand When Not to Opt for Mortgage Refinancing.

It is not worth to refinance home when you do not find any apparent advantage. You should understand that you would not be saving money at all times; sometimes, refi can get you into trouble. It is advisable to wait when the closing costs are not affordable, break-even period is too long, the long-term overheads are high up and you don't have plans to stay in your home for long. A home mortgage refinancing calculator is advised for easy break up of costs involved and thus understand if mortgage refinance is the good decision.

Thus, regardless of the refinance market, your decision to refinance should be mostly influenced by your personal situation.

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