When not to Refinance?

Refinancing does not make sense under the following situations:Your property value has gone down If your property value reduces and you refinance up to 80% of the reappraised value, your original mortgage amount may be higher than this amount. Thus, the new loan will not be sufficient enough to help you pay down the existing one.

You are paying off the first loan for a long time If you are making payments on a long term loan, say, a 30 year mortgage for the past 10 to 20 years, then refinancing to another 30 year loan will not be a good option as it may increase your overall payment.Your credit profile isn't impressive If you have messed up with your credit by delaying payment on loans and bills, there is hardly any chance that you will qualify for a low rate mortgage. Off course there are lenders in the subprime market, but it's better to avoid them as they'll possible charge you with higher rates and fees.

You have used up enough equity in your home Refinancing may not be that useful if you have already used up 90% or more of your home value in taking out a mortgage or any home equity loan. You won't be able to get the best rates available in the market as when you refinance a 90% LTV loan, you will probably require a loan of that value or higher. This will be quite closer to being a 100% financing option and hence the rates will be comparatively higher.

You have a few years left on the current loan If there is only a few years left on your current loan, then there's not much use refinancing it with a long term loan. You may need extra cash but with a long term loan, you may end up paying more throughout the loan period. In this case, if you do not move according to a planned budget then it will be hard to carry out your day to day expenses.Refinancing will make sense if you are into it for the right reasons and at the right time.

You need to decide upon the various ways of refinancing and the possible loan options that will suit your needs and fit into your situation.