When Not To Refinance

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Refinancing does not make sense under the following situations:

• Your property value has gone down:
  If your property value reduces and you refinance up to 80% of the reappraised value, your original mortgage amount may be higher than this amount. Thus, the new loan will not be sufficient enough to help you pay down the existing one.
• You are paying off the first loan for a long time:
  If you are making payments on a long term loan, say, 30 year mortgage for the past 10 to 20 years, then refinancing to another 30 year loan will not be a good option as it may increase your overall payment.
• You have used up enough equity:
  Refinancing may not be that useful if you have already used up 90% or more of your home value in taking out a mortgage or any home equity loan. You won’t be able to get the best rates available in the market as when you refinance a 90% LTV loan, you will probably require a loan of that value or higher. This will be quite closer to being a 100% financing option and hence mortgage refinance rates will be comparatively higher. Moreover, 100% loans are hardly available in times of mortgage market crisis.
• You have a few years left on the current loan:
  If there are only a few years left on your current loan, it’s no use refinancing with a long term loan. You may need extra cash but with a long term loan, you’ll end up paying more for the entire loan term.

Refinancing will make sense if you are into it for the right reasons and at the right time. You need to decide whether you’d go for a simple refinance or take out extra cash too. And in case you’d like to check out what mortgage refinance rates and terms are available, you may request for no-obligation free mortgage refinance quotes from the community lenders and brokers.