A prepayment penalty is a fee that lenders might charge if you pay off your mortgage loan early, including for refinancing. If you are refinancing with the same lender, ask whether the prepayment penalty can be waived. You should carefully consider the costs of any prepayment penalty against the savings you expect to gain from refinancing.
If you’ve kept your credit score in pretty good shape since getting the original mortgage, and if you have enough income, qualifying for a refinance shouldn’t be a problem. But you could run into problems if you’ve experienced credit problems in recent years, or if your income has changed significantly due to a job loss, retirement or other reasons.
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When refinancing your mortgage, you should consider the interest rates of the old and new mortgages, the years you expect to remain in the home, any prepayment penalties on the old mortgage, closing costs of the new mortgage
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When (and when not) to refinance your mortgage. Refinancing a mortgage means paying off an existing loan and replacing it with a new one. There are many reasons why homeowners refinance: the opportunity to obtain a lower interest rate; the chance to shorten the term of their mortgage; the desire to convert from an adjustable-rate mortgage (ARM).
Many Americans who purchased their home when they had lower credit, a shorter employment history, and less money stand to gain from refinancing their mortgages.
As a result, homeowners often refinance when they shouldn’t; and, don’t refinance when they should. is it you’re trying to.
Rates vs. Term. While many borrowers focus on the interest rate, it is important to establish your goals when refinancing to determine which mortgage product meets your needs. If your goal is to reduce your monthly payments as much as possible, you will want a loan with the lowest interest rate for the longest term.
The formula above doesn’t measure your total savings over the life of the new mortgage. A refinance can cost more money in the long run if you start your new loan with a 30-year term.
Could this happen to you. your mortgage broker will often charge an upfront brokerage fee. They should be upfront about.
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