’When should I refinance my house?’ This is a question fraught with complexities that almost every homeowner is faced with at some time or the other. If that is your question too, then here are some pointers which will stand you in good stead.



Analyze the current status. Is the loan an ARM (adjustable rate mortgage)? Do you have to make a major payment in the near future? If your current mortgage is an ARM then it is better that you refinance using a low interest rate fixed rate loan. That way youll end up paying an steady interest even when rates move north. If you are facing an imminent payment situation then again you should go in for a suitable refinance deal.





Look at the market rates. Is your current rate above the going market rate? Yes? Then go in for refinancing. Remember that you have to pay a special fee when you close the mortgage earlier than planned. Youll have to offset this amount when you compute the savings youll make with the lower rate loan.



Planning to move in the near future? Take a three year time horizon for this question. If you are moving, then its best that you shelve the idea of refinancing the mortgage. Youll have to bear the cost of foreclosing the loan not once, but twice!



If you want to pay up the mortgage earlier than agreed upon, you have to pay a penalty, often called a pre-payment penalty. The usual amount of the penalty varies from two years interest right up to five years interest. Factor these figures in when deciding about refinancing your loan. That very profitable proposition may actually turn out to be a losing proposition in the end!



However, if you are going to stay in the same house and you are offered a refinance deal at a lower rate of interest, then take the deal. It doesnt matter that the difference in rates is marginal. The difference will accumulate to quite an amount in the long run.



What is the amount of the refinance? Most probably its going to be higher than your current loan. So your repayment bill will also go up. If the new loan has a significantly lower rate of interest, then the increased repayment bill may be partially or completely offset by the savings in interest. Check that your new repayment amount is within your means.



Refinancing your home at the right time will give you a positive cash advantage. At the wrong time, youll be at a loss. Consult a mortgage expert familiar with your locality to get the proper bottom line on refinancing. If you see an advantage in getting your house refinanced then do so certainly, but just make sure the lender is reputable.