How To Refinance Your Home Mortgage Properly

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The following is a guest post from Daniel at Smarter Finance Today. Enjoy! 

How To Refinance Your Home Mortgage Properly

With the current state of the economy, many people are now looking to refinance their home mortgage to reduce the interest charges and fees that they are currently paying. Advertisements by home loan companies have led many consumers to believe that refinancing their mortgage is a great idea and will always save them money. While this is often true, there are still many things people need to be aware of to ensure they come out financially better off after refinancing their mortgage.

Here are some tips you should follow to refinance your mortgage properly:

Determine If Refinancing Is Right For You

The first thing you should do before refinancing your mortgage is to decide if refinancing is actually the best option for you. There are many great reasons to refinance your mortgage, such as taking equity out of your home to fund the purchase of a new car or to simply try and reduce your repayments by refinancing into a lower interest rate loan. Whatever your reason for refinancing, you should make sure you have looked at some options other than refinancing, such as car loans or separate home equity loans if you are looking to make a large purchase, to ensure you are making the best financial decision.

Understand The Interest Rate Cycle

Interest rates are constantly changing over the course of many years. To ensure your mortgage refinance is successful you need to refinance at a time when the market interest rates are below what you are currently paying on your home loan minus switching fees. If interest rates are currently higher than what you are paying now, then now is not the time to refinance. Instead, try to postpone refinancing until you can get a better rate. If interest rates are lower than what you are paying now, then you should definitely consider refinancing your loan. But remember, just because the current interest rates may be lower than what you are paying now does not mean it is automatically a good idea to refinance, as you need to also consider the often large fees associated with refinancing.

Be Aware Of All The Costs

A mortgage refinance typically comes with many fees. Some of the main ones you will likely see are: closing costs, loan application fees, and broker fees. When reviewing loan refinance offers from various lenders, it’s important that you understand all the fees that will be charged so you can properly compare different lenders. Also, you need to weigh up the interest rate savings against these costs; you may find that the costs of refinancing your mortgage outweigh the benefits, even if you can get a much cheaper interest rate on your loan! To work all this out, simply find one of the many mortgage refinance calculators that are available online, and work out how much you can save.

No Closing Costs? – Be Weary!

A lot of companies that offer refinance loans also offer the option of no closing costs to try and bring in more customers. These deals may seem like a great choice, but you need to be careful. Often, when a company is offering no closing costs on their loans, they are adding extra hidden fees and higher interest rates to make up the difference. So, if you are offered a refinance loan without closing costs, be sure to check all the fine print to make sure you are actually saving money.

Do Your Own Research – Avoid Brokers

Using the services of a mortgage broker is a very common way of getting a home loan or refinancing your current loan. They can provide you with a lot of information about home loan offers that are available from different lenders. But remember, mortgage brokers are paid on commission, so it is actually in their best interests to sign you up for a higher interest rate loan, because they will get a higher commission. You can still use mortgage brokers as a source of information, but once you have the information from them about several good home loan lenders make sure you contact the companies yourself to inquire about their refinancing options. Also, make sure you do your own independent research into mortgage refinance options that are available, and don’t rely entirely on what your mortgage broker says.


Refinancing your mortgage can be one of the biggest financial decisions you will make. Make sure you know why you are refinancing, do your homework, and don’t let other people tell you what a great deal is; come to your own conclusions by researching your options effectively!

How about you all? Have you ever refinanced your home? If so, why did you do it? 

Looking back on the process, do you feel it was the right decision? Do you know how much money you saved by doing it?

Share your experiences by commenting below! 

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  1. Refinancing makes no sense for me because closing costs would eat me alive as my mortgage is under 100,000. Oh well! I have a low payment anyways…
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