On The Question of Refinancing A Mortgage On Your House
Sep 9, 2009 Mortgage Lender
‘What are the implications of refinancing the mortgage on my house?’ This is a question fraught with complexities that almost every homeowner is faced with at some time or the other. If that is your question too, then here are some pointers which will stand you in good stead.
If your current mortgage is an adjustable rate mortgage (ARM) and the fixed interest mortgage rate is less than your ARM rate, then you should certainly refinance your house! Paying a steady interest will be beneficial in those times when the interest rate goes up. Another reason to refinance your house is to get a mortgage with a cash component which you can use to meet imminent payments.
Look at the market rates. Is your current rate above the going market rate? Yes? Then go in for refinancing. Remember that you have to pay a special fee when you close the mortgage earlier than planned. You’ll have to offset this amount when you compute the savings you’ll make with the lower rate loan.
Planning to move in the near future? Take a three year time horizon for this question. If you are moving, then its best that you shelve the idea of refinancing the mortgage. You’ll have to bear the cost of foreclosing the loan not once, but twice!
The penalty amount is often called a pre-payment penalty. This helps the mortgager to recover some of the costs he’s incurred under the existing mortgage. The lower end of the pre-payment penalty is two years’ interest. The higher end can go up to five years of interest! These are significant amounts we’re talking of here, so be careful that you take them into account when computing your net savings.
If you are not moving and if the interest rate is favorable, then you are better off taking a fresh mortgage on your house. Even a small difference in the interest rates will add up to an appreciable amount at the end of the new refinance term.
What is the amount of the refinance? Most probably it’s going to be higher than your current loan. So your repayment bill will also go up. If the new loan has a significantly lower rate of interest, then the increased repayment bill may be partially or completely offset by the savings in interest. Check that your new repayment amount is within your means.
Refinancing your home at the right time will give you a positive cash advantage. At the wrong time, you’ll be at a loss. Consult a mortgage expert familiar with your locality to get the proper bottom line on refinancing. If you see an advantage in getting your house refinanced then do so, but just make sure the lender is reputable.
Did you know you can even refinance your mobile home or upgrade your financial condition with a manufactured home refinance? Learn about these methods and other house refinance information by visiting www.home-mortgage-refinancing-loan.com.
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Tags: financial, loan, loans, Mortgage, Mortgage Lender, refinancing
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