To Re-Mortgage Or Not To Re-Mortgage, That Is The Question

Written By: Richard S. Rymer on April 16, 2010 No Comment

Anyone with a mortgage today, and who has lived through the constantly changing conditions and rates of the mortgage world over the last decade, is always asking the same question: is re-financing worthwhile?

This is not an easy decision, since there are many factors that dictate the cost of this decision.

How you time your new loan can make a big difference, since there are frequently short periods in the market where interest rates fall briefly, and you can use this to your advantage.

But it is important to be sure that whatever long term savings you have outweigh the immediate costs of a new re-mortgaging package.

There may also be an advantage of moving from a variable to a fixed rate mortgage if you ever have the opportunity, avoiding those frequently adjusting rate changes.

If you have been able to improve your credit rating since you took out your mortgage originally, you may be able to negotiate a better rate on the same mortgage.

If things in the general economy have altered, you may be able to obtain lower rates by other lenders. A new financing package will allow you to take advantage of this shift in the economic winds.

Sometimes, you may not have a choice in the matter, and you have to arrange a new home loan because your original loan was a balloon mortgage that has now become due. In this case, you should take advantage of any of the above conditions and use them to your advantage.

An improved credit situation will automatically qualify you for more advantageous rates and even a longer maturity. If you have become tired of refinancing every five years, this will be a big relief.

If you have improved your credit situation, you may save more by re-financing and renegotiating a mortgage that does not require you to have mortgage premium insurance.

However, all of the above reasons for refinancing must be balanced by one very critical question: how much are the fees for refinancing? Most reputable lenders will be able to tell you exactly what the total costs for refinancing are, and you should be able to figure out what your savings from refinancing are. (Your current lender will give you balances due, expected monthly payments, etc.)

If the total savings on your current loan do not equal or exceed the closing costs, the re-financing deal is not worth while. And you may want to reconsider if it barely covers the cost, since you are going to be putting a lot of time and energy into the re-mortgage.

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