Home Loans: Is now the right time to refinance?

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You could very well be right, but there are some things you can do to help decide whether it's time to refinance your mortgage.

The first thing you need to verify is the interest rate for your existing mortgage - and the interest rates being offered across the board for new loans.

If there's not at least a one and a half to two point difference, you're probably not going to be significantly better off to refinance your mortgage.

Here's why.

Remember those costs on your initial mortgage?

You probably paid for a valuation, perhaps a building expection, lenders fees ... not to mention stamp duty!

Depending on how long it's been since your original loan, you may be faced with having those processes repeated.

Especially if you are going with another lender, have had the existing mortgage for at least two years, have made major modifications to your home or property, or have seen some significant variations in property values in your area, you're probably going to be required to have a new valuation at the very least.

Remember, it's important to take these costs into consideration when comparing the amount you're going to save on a slight drop in interest rates ... it may take many months ... or even years to recoup those expenses.

Don't forget that you'll likely have some additional costs from the lender on the new mortgage (you are, after all, taking out a new mortgage even though you have an existing loan) and, in some cases, you may even be facing penalties for paying off your existing loan early.

Weigh those costs against what you expect to save before you take this step.

So, does that mean that you should never refinance an existing mortgage?

Actually, there are plenty of opportunities when refinancing your mortgage makes good financial sense.

If you've significantly increased the value of your home or have been paying for several years, you may have enough equity to qualify for a better interest rate.

You may also lower monthly payments or refinance to make improvements.

In the end, it's up to you to weigh the costs of refinancing your mortgage and decide if the time is right for you to take this step.

We have provided for your assistance a free mortgage refinance calculator to help you do the sums.