Considering refinancing should be a part of your healthy mortgage diet. But, like good food, too much too often, or at the wrong times, can hurt you more than it helps. Here are four case where you might find it better if you DON’T refinance.
1 Interest-Rate Chasing, or, Too many, too often
There are costs associated with refinancing. Just like with your original mortgage, there can be application fees, appraisal, and a title search, just to name a few. Refinancing too often, by chasing the best interest rate, or for any other reason, can take more out of your pocket than you save.
Chasing the best interest rate can take more out of your pocket than you save
2 Long Term Costs, or, Cheaper for longer hurts
Sometimes, it’s possible to refinance to a lower rate, and have lower monthly repayments, but actually be setting yourself up to pay significantly more in the long term. The repayments on a 30-year mortgage, for instance, can look attractive. However, if you calculate your total repayments over that time and compare to what you have now, or even a new, shorter-term mortgage, you may discover a much better option.
It’s possible to refinance to a lower rate but actually pay more
3 Break-Even Time, or, Will it be worth it?
The costs of refinancing can often be outweighed by the potential savings or added flexibility. However, take the time to calculate your break-even point. How long after you refinance will your new savings cover the cost of the refinance? Especially if you’re planning to move soon, this can really reduce the value of refinancing.
How soon will your savings actually repay the cost of refinancing
4 Quick Cash, or, Are you just money spinning?
Refinancing can be a great way to access more of the equity in your home. But if your primary purpose is to increase your cashflow, you need to be sure you’re doing it for the right reasons. Will you be able to keep up with repayments in the long term? Will the value you gain from the extra money be worth the cost you add?
So DON’T refinance… without thinking it over.
Before you decide to refinance, talk to an expert and run all the figures. Consider the life of your current loan, and its payments, and the life of your intended loan. Calculate the associated fees. Weigh up the benefits. Don’t refinance until you understand your situation.
And if you are considering refinancing, and you’re not sure if this is the right time for you, contact us for expert advice and assistance.