The Pros And Cons Of Refinancing Your House

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‘What are the implications of refinancing the mortgage on my house?’ This is a question fraught with complexities that almost every homeowner is faced with at some time or the other. If that is your question too, then here are some pointers which will stand you in good stead.

If your current mortgage is an adjustable rate mortgage (ARM) and the fixed interest mortgage rate is less than your ARM rate, then you should certainly refinance your house! Paying a steady interest will be beneficial in those times when the interest rate goes up. Another reason to refinance your house is to get a mortgage with a cash component which you can use to meet imminent payments.

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So if the current market rate is lower than the rate you are paying, it is plain simple common-sense to refinance your house at the lower rate. Mind you, there is a catch. What you save over the months and years with the lower interest will be offset to a lesser or greater degree by the penalty that you have to pay for terminating the mortgage earlier than planned. Factor this into your computations to see if the interest benefit in refinancing is worthwhile.

Find out the penalty that you’ll have to pay if you foreclose your mortgage. If you have plans on the horizon of moving house, then this is not a suitable time to refinance. Because you’ll have to make one penalty payment now to refinance the house, and a second one when you move.

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If you want to pay up the mortgage earlier than agreed upon, you have to pay a penalty, often called a pre-payment penalty. The usual amount of the penalty varies from two years’ interest right up to five years’ interest. Factor these figures in when deciding about refinancing your loan. That very profitable proposition may actually turn out to be a losing proposition in the end!

However, if you are going to stay in the same house and you are offered a refinance deal at a lower rate of interest, then take the deal. It doesn’t matter that the difference in rates is marginal. The difference will accumulate to quite an amount in the long run.

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What is the amount of the refinance? Most probably it’s going to be higher than your current loan. So your repayment bill will also go up. If the new loan has a significantly lower rate of interest, then the increased repayment bill may be partially or completely offset by the savings in interest. Check that your new repayment amount is within your means.

Refinancing your home at the right time will give you a positive cash advantage. At the wrong time, you’ll be at a loss. Consult a mortgage expert familiar with your locality to get the proper bottom line on refinancing. If you see an advantage in getting your house refinanced then do so, but just make sure the lender is reputable.

Did you know you can even refinance your mobile home or improve your financial situation with a manufactured home refinance? Learn about these ideas and other house refinance info by going to

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