What to Consider When
Refinancing: Hidden Costs
You simply cannot
undertake home mortgage refinancing on a lark. It is
vital that you do your homework -- thoroughly and completely.
As with anything regarding large sums of money and your
future, you should be armed with as much knowledge as
possible to avoid being preyed upon by the unscrupulous.
Mortgage and refinancing hunters are especially vulnerable
to charlatans, despite the constant government involvement
in the industry’s affairs. However, aside from making
sure you aren’t charged for things you weren’t told
about, there are some hidden charges that refinancers
bring on themselves.
Contrasting Interest Rates: Make Sure
You Know the Actual Interest Rate
One of the things
you should be concerned about is the total amount of
interest you would pay on a refinanced loan. Compare
it to your total interest now and see what the difference
is. Remember that since most of your early payments
are interest and most of your final payments are principal,
you will still have a high loan balance after several
years of payments. For a traditional 30-year mortgage,
the point where your interest and principal are equal
is 22.5 years.
If you refinance,
you are staring that process, called amortization, all
over again. Your very first payment on your first loan
was almost all interest—so will your first payment on
your refinanced loan. If you refinance more than once,
this process can prevent you from building equity in