When Can I Refinance My Home?

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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.

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