There are a number of different reasons you may want to refinance your home mortgage loan, the most common reason being that people want to lower the monthly payments, mainly by lowering the interest rate.There are a couple of things that you must consider when you are looking at refinancing your home mortgage loan. You need to work out in your own mind how much money it will really save you, you should take into consideration the closing costs, and any other refinancing fees.The things you must consider include:* Seasoning period* Early Payoff penalty* Closing costs and any fees* Break even analysisThe 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 is to prevent you from refinancing too early.Some lenders also add in early payoff penalties, these are fees or fines that must be paid to exit the mortgage. 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 do refinance your mortgage then you may have to pay off these penalties before you can take out the new loan.Most important, you should be very careful not to take out a new loan that comes with a prepayment penalty, nobody knows what might happen in the future, so it’s not worth signing such a thing.It is important to work out exactly how much your home refinance loan will cost you, don’t just work out the internet. 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 plan on living in the home for only a little time then you must calculate this breakeven point. Once you have recovered all of the costs from refinancing, it may be a good time to refinance again!You work out the break even point by looking at how much you save each month, and then comparing that with the costs. You can use these figures to work out how many months it will take you to break even.Most mortgage policies will require you to wait one or two years before refinancing your home, but every policy is different. You should ask advice about your mortgage before refinancing.
Before you look at refinancing your home loan you should ask yourself a few questions, we have looked at a few of these below:1. Work out exactly how much it will cost you to refinance your loan. Remember these aren’t just the direct costs associated with refinancing your loans, you will also have to pay for the insurance. There are many different refinance calculators on the internet that you can use to work out exactly how much your refinancing will cost you, you can then decide whether or not it’s worth it.2. There are a number of reasons to refinance your loan, one of the most popular is to get better loan terms. You should be able to get a shorter term for example, you may be able to pay your mortgage off within 15 years, as opposed to your current 30 year loan for example. Refinancing doesn’t always save you that much money, however if you are doing it to get better terms it can defiantly be worth doing.3. You should include all of the loans closing costs in your figures when working out the costs of the loan. You should remember that if you do not pay the closing costs upfront you will have to pay the interest on the value of these closing costs over time. Make sure you remember to include this interest in your loan calculations.4. You should find out whether you will need your home equity line of credit to use in the future. There are great benefits of having an available home equity line of credit which is available for you to use in the future. If you don’t have any savings, then it is quite important to keep as much money available in your home equity for emergencies. If you refinance 100% of your home, and need money for anything else, then there’s nothing else you can do.When you look into refinancing your home it’s important to ask these questions, otherwise you can run into many problems. It’s important to understand that you should keep enough money in your home in case you ever needed it in the future. If you maximize the amount of money that you borrow against your home, then it means you may be unable to borrow more.Ideally, you should only borrow as much money as you need. Hopefully by refinancing your home loan, you will be able to get yourself out of numerous debt problems that you may be suffering from.Remember to look hard for any of the hidden costs as well, don’t forget that if you do not pay the closing costs up front then you will be required to borrow the extra money and so you’ll have to pay the insurance on this amount.