Refinancing a mortgage is something that most homeowners at least consider at some point during the time that they hold a mortgage. Whether it’s the appeal of a lower rate, a reduced monthly payment, a sense of cost certainty, better lender service or a variety of other reasons, there’s almost always something that holds enough appeal to encourage many people to consider refinancing and causes a significant number to go through with the process.
Deciding whether to refinance, and if so, which mortgage product to select, can be difficult and time consuming. Asking and answering the following questions can help you through the experience.
What Is My Goal in Refinancing?
While “to get a lower rate” may seem like an obvious answer, and is in fact typically a factor in the decision to refinance most of the time, a surprising amount of the time it’s only one factor among several. Occasionally people will actually refinance at a higher rate to achieve some other goal, such as moving out of an adjustable rate mortgage with a low rate to attain cost certainty by refinancing with a higher rate fixed interest mortgage. A cheap home loan isn’t always the best home loan, depending on your circumstances.
By clearly establishing your goals you can much better determine whether refinancing makes sense at a given time and, if you conclude that it is, which product to select.
What Features Are Important to Me?
Determining key mortgage product features can greatly narrow down the number of viable options for you. For instance, it may be particularly important to you that there be no penalty for early repayment, or you may regard repayment schedule flexibility to be critical, and will only want to consider those choices that contain such features.
Are there New Products on the Market?
Many mortgage experts recommend making an assessment of the mortgage product marketplace every three years to evaluate whether there’s something relatively new that’s available that would make refinancing attractive. Lenders release new products fairly regularly and some contain previously unavailable features that may make refinancing a good idea for you.
What Will Refinancing Cost Me?
There are typically fees associated with undertaking a refinance that the borrower is required to pay under the umbrella of closing costs. By obtaining a full accounting of these expenses you can calculate how long it will take to realize savings from a lower rate mortgage and help you determine whether refinancing makes sense for you.
Readers: Have you refinanced a mortgage? What advice would you give someone contemplating a refinance?