The Right Moment to Refinance

You've heard that interest rates are at an "all time low" and you figure that's a good indication that you should refinance your existing mortgage. You may be right, but there are some things you need to consider before you decide to start the refinance process.

The first thing you need to know is the interest rate on your existing mortgage. Then, make a comparison between that rate and the one you might be offered in case you should opt to refinance. If the current interest on your mortgage is not at least one and a half or two percentage points higher than the present market rate, then, refinancing won't be an excellent opportunity for you. Besides, in a refinance you'll face closing costs that might include an appraisal and fees meant to pay off your existent loan in advance. In case your new interest rate should be hardly better, a long time will pass before you
had paid the amount of your new loan.

Another thing to consider before you decide that it's time to refinance is your future plans. If you are considering to move house in less than two years, a new loan is not worth the
costs. If, for example, you expect your job to require a move or you plan to sell your house soon for the equity you've accrued, you won't likely recoup the cost of closing a new loan.

Does this mean that there's never a time when refinancing is a good option? Not at all. In fact, there are some times when a refinance loan is an excellent financial move. Maybe you took out your original loan when your credit score was low and the only way you could get a loan was to accept a high interest rate. That's sometimes the case with first time buyers, but you might have increased your credit score if you've made regular payments for a couple of years. In that case, it could very well be time to refinance. You could take advantage of low interest rates and be increasing equity in a shorter time than with your existing mortgage.

It can also be that you had requested a loan at a time when credit and market conditions were adverse, and now it is a burden for your financial position. If you are currently financed at a variable interest rate, you may simply want the security of knowing the exact amount your mortgage payments will be each month. In these last cases refinancing could certainly be advisable.

Debbie Groves is the owner of Mortgage Refinancing People mortgage refinancing which is a premier resource for refinancing information. For more information, please visit http://www.mortgagerefinancingpeople.com

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