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What to Keep in Mind With Home Mortgage Refinance

Jun 26, 2008
There are quite a lot of things that you must keep in mind while considering the home mortgage refinance option. Though it is a great money saving decision, you still need to be careful. Read on and know how.

Take Your Own Time

A decision taken in a hurry might just backfire on you. Herein, due cognizance must be taken of the long term-affect of the refinancing option. You might just end up paying more for this mortgage then your original mortgage. So, compare the different rates offered by the lender, look up the pros and cons and then make your decision.

The Fixed Rate Loan Vs a Variable Rate Loan

Are you saddled with a variable rate loan and your rate of interest is increasing day-by-day? Well, home mortgage refinance will help you switch over to a fixed rate of interest.

An adjustable loan rate will help you select protective features like lower cap rates, and cash removal from the home equity.

The Annual Percentage and Rate Fees

This is the prerequisite consideration of any mortgage plan. Before you sign up for a refinance plan, be very sure about your total projected savings. In effect, the cost of financing your new mortgage, in totality, must be less than the savings you incur as a result of interest.

You can cut down on your home mortgage refinance cost by asking for no upfront money and simultaneously going for lower interest rates.

The "Safe Margin"

The "Safe Margin' allows you to decide whether you must go for the refinance option or not. If the comparison of the balancing cost of savings against refinancing is more than two percentage points higher than the existing market rate, then you can definitely go for mortgage refinancing.

Moreover, you must also be prepared to stay in your home for a sufficient amount of time and harbor no thought of moving out. Typically your savings will be realized in about 3-7 years, dependant on the costs at the time you decide to take out a home mortgage refinance.

Loan Comparison

Comparison between the original loan and new loan has to be done, keeping the future in mind. You must have a fair idea as to how long you want to keep the new loan. In the end, home mortgage refinance is a good option only if the total cost of the current mortgage is more than the total cost incurred as a result of new mortgage. Meaning, your new mortgage will enable you to save money.

Be Wary of the Pre-Payment Penalties

You might want to pay off your original mortgage early but be aware of the pre-payment penalties involved in the process. Lenders are liable to charge penalty fees, if you are interested in paying off the first mortgage earlier then the designated time frame. This takes care of their interest, which would have been their due if the loan payment had been carried out through its life.

The great part of a home mortgage refinance is that, at times, even if the closing cost of your earlier mortgage are added to the new mortgage, the cost of the new refinance mortgage will still be lower than the original mortgage.

As can be seen, there are quite a few things you should keep in mind while taking the path of mortgage refinance. Give due thought to all before you make your decision.
Getting a home mortgage refinance is considered a highly profitable decision by many. However, if not thought through, the decision might end up costing you. Visit LoanWeb below today for the best refinancing services on offer.
About the Author
A Home Mortgage Refinance or Home Mortgage loan can be confusing if you are a novice in the subject. Increase your knowledge base by visiting the web site located at http://www.homemortgageloan-refinance.com.
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