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6 reasons not to refinance your home mortgage

Home mortgage refinancing can get you lower rates or better terms, but just because you can doesn't always mean you should. Here are some times in which refinancing probably won't be a good option for you.

1.

You already have a low rate

Why bother refinancing if you already have a great rate? There are costs involved with almost any refinance, and you'll have to start your repayment term over as well. However, if you can refinance at no cost and get a better rate than you currently have, you should go ahead.

2.

Your credit score has dropped

Refinancing has not gotten any easier in the wake of the foreclosure crisis, nor has it become cheaper. Conventional (non-government) loans come with substantial fees for riskier borrowers, so you won't likely save money if your credit scores are low. Before you give up, however, check into FHA refinancing.

3.

Your mortgage is nearly paid off

By restarting the clock on your mortgage, refinancing could cost you thousands over the life of your loan, even if you drop your rate. One option? Refinance to a shorter term like 10 or 15 years.

4.

The value of your home has decreased

If your home's value has dropped significantly, you may not have enough home equity to make refinancing economical or even possible. If your current mortgage is owned or serviced by Fannie Mae or Freddie Mac, look into the Home Affordable Refinance Program (HARP), which was created for borrowers with little equity or even negative equity.

5.

You plan to move soon

If you are planning on moving soon, refinancing may not save you enough to recoup your costs. But look into loans like ARMs and hybrid ARMs, which can give you very low rates fixed for a few years.

6.

Interest rates have gone up

The only reason to refinance to a higher mortgage rate is to replace an adjustable rate mortgage with a fixed loan. Just understand the costs and benefits before choosing a loan.

A home refinance makes sense when you do it at the right time and for the right reasons--make sure that's the case before committing to a refinance today.

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