When Is The Right Time To Refinance My Home?

The most common reason people refinance their homes is to lower the monthly payments.

Of course, there are things to consider when you plan to refinance your home mortgage loan. Compute how much you will save, and don’t forget the expenses like the closing costs and others.

The things to consider: The seasoning period Early Payoff penalty Closing costs and any fees The break even testing

The seasoning period is a clause that most lenders add into their contracts. This simply means that you are not permitted to refinance your mortgage until you have lived in your home for one or two years. This serves to keep you from refinancing too early.

There are some lenders who require early payoff penalties, which is a sum that you must pay if you want to get out of the mortgage sooner. You could well find that you current mortgage already includes these, and so you would have to pay them to refinance the mortgage. If you will refinance your mortgage, then you have to pay off the penalties first.

It’s very important that you don’t take a new loan that comes with a prepayment penalty since you never know what circumstances you’ll meet in the future.

You should find out exactly how much your home refinance will cost you. You should also remember that you must pay the closing costs, and the fees.

At the start of the loan you will be paying out more than you have saved, but it comes a time when you will break even. This breakeven point is where you recover the amount of money that it cost you to refinance the loan, which includes all the fees, and closing costs.

If you will only live in the home for a short time, then you must calculate the breakeven point. When you’ve broke even, then you can refinance again!

You can know the breakeven point by examining how much you save monthly with the costs. You can then work out how many months it will take you to break even.

Mortgage policies usually require at least 1 or 2 years before you refinance, but it can vary. Before refinancing, make sure to get advice about your mortgage.

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