Even if you meet all the criteria, refinancing still may not be the best option. Here are some reasons you should wait:
- If you have had the mortgage for a long time
More and more of your payments go toward the principal rather than the interest as you pay off their loan. If you are towards the later years of your term, the monthly payments go back to paying more interest than principal, costing you more money in the long run.
- If your current mortgage has a prepayment penalty
A prepayment penalty is a lenders fee for paying off your loan early, including refinancing. If you are refinancing with the original lender and have a prepayment penalty clause, ask if it can be waived. If you cannot get it waived, ask to see how much extra time it will cost to pay off this penalty versus what you would gain in monthly savings.
- If the borrower is planning to move in the next few years
Planning to move? If so, the savings from lowered monthly payments might not exceed the costs of refinancing. Use a refinance calculator to determine if refinancing is worth it.