Is It Worth It To Refinance a Mortgage
March 19, 2009 by · Leave a Comment
Your mortgage can be reviewed at any time during the term if you wish to explore your options. You do not have to wait until the mortgage has had time to mature. You can if you wish but you do not have to.
While a fixed term mortgage is a non-negotiable contract and will incur refinance penalties, it is still a smart idea to ask for a mortgage analysis. This analysis can help you to decide if refinancing a home mortgage in order to get a lower monthly payment or to pay off debts is in your best interest or not. The mortgage analysis can help you to better ascertain the penalties versus the payoffs that will form the bulk of your decision making process.
When it comes to refinancing a 2nd mortgage you can do one of two things. You can pay out the penalty that exists on your current mortgage and then start anew with a refinance mortgage or you can go with the “blend and extend” option.
Before you even begin to ask how to refinance a home mortgage you must be aware that the rewards that come from refinancing a home mortgage will not be seen in the short-term. Instead you will see some penalties when you choose to refinance your mortgage.
If you plan to sell your home in a year or so then you might want to rethink your decision to refinance a 2nd mortgage. Refinancing a home mortgage if you plan to sell right away will not allow you to reap any benefits whatsoever. Refinancing a home mortgage will only yield benefits in the long-term.
Ask the refinance lender to accurately assess for you what your payback period for refinancing a home loan would look like. A payback period is the length of time that it would take to see any savings come from the decision to refinance a mortgage. This is largely based on the penalties and the difference that would exist between what your existing interest rate is and what your refinance interest rate would be.
Penalties play a role in the decision of whether to refinance a home mortgage or not. The penalties you would have to pay to refinance a 2nd mortgage would be either the greater of three months worth of interest on your home or else the differential in the interest rate. The interest rate differential could be quite high. You will need to discuss all of this with the refinance lender in order to make the best refinancing mortgage decision possible.
