Refinance-Mortgage: When Not To Refinance

Refinance-Mortgage: When Not To Refinance

If you are getting close to the end of your term of the loan, or your mortgage loan has a prepayment penalty, or you plan on moving soon, then refinancing is probably not the best idea. All of those options will backfire on the amount that you may be able to save from refinancing.

As you get closer to the end of your term, you start to pay more in principle and less in interest. So, if you were to refinance, you would essentially be starting your loan all over again and would therefore, start to pay more in interest versus principle once again, just like at the start of the loan when you initially took out the loan.

If your mortgage loan has a prepayment penalty, that means if you pay your loan early (which refinancing can allow), you will be fined a large enough amount of money that could backfire on whatever amount of money you were able to save by refinancing, not to mention the cost of the actual refinancing process on top of that. Keep in mind that every time you refinance, you need to pay the refinancing charges, and there may be hidden fees as well associated with refinancing.

If you plan on moving soon, chances are, you won't stick around long enough to allow whatever you may save from the refinancing to accumulate to enough of a savings to combat what you spent on the refinancing charges to begin with! However, if you are able to get a lower interest rate, and you plan on staying in the house long enough, and you have not had your mortgage for long enough to be paying mostly principle instead of interest, then refinancing may be right for you. You also need to be sure though, with your current mortgage loan, that you won't be penalized for paying your loan off early if you are refinancing to be able to pay it off early.

See about a refinance-mortgage today!

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