Home loan - mortgage refinancing : A wise action?

When your home-loan has reach around 5 to 10 years, you might be thinking to re-finance your home mortgage to get the extra money for let say, home renovation, or other property investment, or home decoration, mutual trust or even play with stock market. Another benefit is that If you obtain a lower interest rate on your new loan than you had on your old one, you'll be saving money.

The question is that when is the most suitable time to refinance your mortgage? Generally, there are two good times when it's wise to refinance your mortgage. If you've got an adjustable rate mortgage, one of those times is during periods of rising interest rates. If you refinance to a fixed rate mortgage, particularly to a rate similar to your present low adjustable rate, you'll avoid the higher costs when the adjustable rates start going up.

The other time it's a good idea to refinance is when you'll save money by getting a lower interest rate. In this case, you'll want to make sure that your monthly savings will pay back your refinancing costs while you're still living on the property. If you sell your home before your refinancing has paid for itself, you won't be saving anything.

If you are experiencing cash flow difficulties, you may be tempted to lower your monthly mortgage payments by refinancing to extend the term of the loan. From a savings perspective, this is not a good reason to refinance. Unless you get a lower interest rate on the new loan as part of the bargain, you're not really saving any money; in fact, the reverse will be true. If you extend the term of your mortgage without changing anything else, you might loosen your tight cash flow situation, but you'll actually pay more total interest on the mortgage in the long run.