To Refinance Or Not To Refinance? - That Is The Question

The most popular time to refinance a mortgage is after the holidays.

Some associate this time of a year with a "Financial Hangover" - a term used to describe the feeling  one gets when the December credit card bill arrives... and realizes that one hasn`t received nearly as many presents as has purchased for others :)...

There are a few things to consider when refinancing your mortgage.

First, the question of timeline. As of March 18th, the maximum amount of mortgage that you will be able to get when refinancing is 85% of the value of your home. So, if you would like to maximize your equity take-out, you should do so soon.

Second, will you save money by refinancing? The legal fees associated with mortgage refinancing are roughly $500, appraisal fees are an additional $200. And how about the penalty if your break your current mortgage? You have to do the math! Otherwise, I will :)

Third, it depends on what kind of a mortgage term you`re in now. If you have a fixed rate that is near or higher than 4.5%, or a variable rate that is just under or above Prime, the savings from refinancing could exceed the costs. Again, math is to be done.

I admit -  I keep repeating the same thing over and over in my newsletters, but there is a reason for it. As your mortgage gets closer to the maturity date, the penalty for breaking it also changes. This is because the penalty, in today`s market, is most likely based on Interest Rate Differential, which changes over time.

If refinancing did not make sense last year, it might make sense this year. Or it might not. Hence, "To Refinance Or Not To Refinance - That Is The Question".



 



### Posted on: February 08, 2011 by Tino Brelak.

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