Home mortgage refinancing is a bit expensive. You have to understand that you are responsible for paying the closing costs and other loan fees. If you will apply for another refinancing after a few years, you will definitely have to pay these costs again.
So it is important to carefully consider your long term plans and circumstances before you apply for refinancing. For example, a change in your financial and credit position might prevent you from reapplying. This is particularly important for those who are retiring soon. When you retire, your income will surely be affected. Consider this income reduction and determine if it will have a significant impact on your capability to repay the new loan.
For young couples, they should take into account their future family plans. They should consider applying for a mortgage refinance now in order to enjoy lower monthly repayments. If one of them decides to stop working to attend to the needs of the children, then they may not be able to qualify for refinancing due to a loss of salary.
It would be best for young people to consider getting a portable mortgage. This loan option is available in the market and designed for those with a lot of ambitions and career expectations. With a portable mortgage, there is no need to pay down the whole loan when they decide to move. They can simply carry the mortgage to their next home and continue paying the remaining balance. It is a good option to avoid redemption penalties and to ensure that their current rates can be retained.
People should also consider their options if they are planning to establish their own business in the near future. Once they become business owners, they will lose their status as wage or salary earners. The change could affect the credit position of borrowers. In most cases, mortgage lenders will require self employed people to produce proof of profitable accounts for the last three years. If you are self employed now, then you have to meet the three-year restriction period. You should consider this now before you make any decision.
As a rule of thumb, you should avoid refinancing to your maximum ability. You have to allow for some safety margin. This margin will enable you to save money in preparation for unforeseen difficulties in the future. You need to have at least 3 months to 6 months of back up savings and extra money to cushion the effects of earning reductions.
The existing low rates for mortgage refinancing schemes could serve as a good benchmark for planning your future actions. Whatever plans you have in the future, you should always consider the current situation. You have to strive to save more today in preparation for the rainy days. If the rates go up and your financial situation changes, then you will get hit both ways.
You could have a good credit score today so it would be easier to qualify for refinancing. Unfortunately, a slight bump in your financial situation could pull down your score. That is why it is important to consider the future situation so you can plan your financial move today.