Saturday, December 22, 2012

Before Refinancing, Check Out Its Costs Also

If you are thinking of refinancing your mortgage loan, one important question that may arise in your mind is that how many times can you refinance a mortgage. In fact there is no limit on the number of times you can refinance the mortgage loan. Some of you refinance the mortgage loans many times during the entire mortgage term but you must take note of the fact that repeated refinancing may not always be a good thing. Usually lenders do not pose restrictions on the number of times you can refinance. But in order to get approved for refinancing, you must meet all the eligibility criteria. However, one important thing that you must take into consideration is the cost effectiveness of refinancing a mortgage loan. Check out the prepayment penalties Before opting for refinancing you must check out the prepayment penalties involved in the loan. If a mortgage loan is paid off prior to the termination of the loan term, then a prepayment penalty is imposed on the loan. Generally a prepayment penalty amounts to a certain percentage of the amount of the loan and the prepayment penalties vary from lender to lender. A prepayment penalty associated with a loan discourages you from refinancing a mortgage loan or to pay off the loan faster. Find out the closing costs Refinancing is equivalent to taking out a fresh loan and so the closing costs are also involved in it. Closing costs include loan origination fees, application processing fees, recording fees, title searches, appraisal fees and other associated costs. You need to take into consideration all these costs before applying for mortgage refinancing. Sometimes the closing costs may be as much as high as 5% of the amount of the loan. The positive effects of refinancing may sometimes be outweighed by the negative effects of the closing costs. So, before applying for refinancing or repeated refinancing, you need to seriously take into consideration the closing costs involved in the loan. You need to keep in mind the following things before refinancing. You should know whether it pays to refinance your mortgage. Check out these things. If the current rate of interest is lower than the rate on your mortgage loan, then refinancing may be a good choice for you. But you need to ensure that the interest rate is low enough so that you will be able to break even after refinancing. One important thing that you must take into consideration is how long you are willing to stay in the home. If you don't have plans to stay in the house for a long time period, then refinancing may not be a good option for you. Also check out the prepayment penalties as well as the closing costs involved in the loan. This will help you to find out whether or not the benefits associated with refinancing outweigh the costs involved in it. It is to be noted that first of all, you will have to be eligible for mortgage refinancing. In case you have poor credit score and inadequate income to pay off the new mortgage, your refinancing appeal may not be approved at all.

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