Like everything else that goes into the funds around your home, looking at refinancing a mortgage has positive and negative aspects to it. The things that you need to look at so you can make a balanced decision go well beyond the historical mortgage rates and the present numbers. For example, there are a few subjects that you should scrutinize closely around mortgages themselves before you make any decision.
For example, you’ll need to look at the prepayment penalty for paying one mortgage off early and refinancing another one. If the prepayment penalty is higher than the amount you’ll save on a mortgage with a lower interest rate, you should back away from the whole process and take a second look. It’s also a good idea to keep in mind that if you are late in the amortization of your mortgage, refinancing will reset the whole process from the start.
When that happens, you’ll be paying a larger percentage of each payment in interest rather than principal. When you scratch the surface you’ll see that deciding whether or not refinancing your mortgage is a good idea is based on much more than what you need money for.
However, you might want a longer mortgage term so you can decrease the amount of money that you pay each month and for that reason, refinancing is a good deal if you carefully balance the numbers. The economic landscape has a lot to do with whether refinancing a mortgage is a good idea or not as well.
If you have an adjustable rate mortgage and rates are going up, it might be in your best interest to lock into a fixed rate. Here’s another scenario where this kind of financial transaction will work. If you have some equity built up in your home and you refinance for more than you owe, you can get the difference in cash for remodeling, which in turn can increase your equity when you’re ready to sel
