Pieces of Mortgage Refinance

In truth, the three items explained below apply to all home loans, not just refinance loans. But it's critical for you to understand them when refinancing your mortgage (or even considering it), because they will help you determine whether or not it's a good idea to begin with.

1. The Mortgage Term — In this context, the "term" is the length of the new loan and any conditions that may apply. In other words, it describes how long you have to pay the loan back, and under what conditions. When you refinance, you will need to consider the term of the new mortgage to see if the money you save (by having a lower interest rate) makes the refinancing process worthwhile to begin with.

2. The Interest Rate — This is one of the ingredients that make up your mortgage payment, so it's obviously an important factor to consider before pursuing the mortgage refinancing path. In fact, this item alone will determine whether or not you should refinance in the first place. Even if you get a lower interest rate on the new loan than what you're paying now (which is the whole point of refinancing), the mortgage term must be long enough for you to reach the "break-even" point. Otherwise, it doesn't make sense to refinance your home at all. More to follow on this.

3. Additional Mortgage Expenses — Do you remember all of the fees you had to pay when you bought the home, during your closing process? Well, those are going to come into the picture again during your mortgage refinancing process. This is another important item to consider before you refinance because it will help decide if it's worth pursuing. Remember, the money you save by paying a lower interest rate must exceed the cost of the new loan ... and this refers to the closing costs associated with the refinance.

Talk to a Certified Mortgage Planner Today to determine if there are programs or options that make sense for you today!