Refinance mortgage Loans

Some mortgage borrowers think that they canalwaysbrefinance their mortgage in the future. However, this is not true

1) If home values stop going up, your original loan amount may exceed the value of your home;

2) If you have an adjustable-rate mortgage, it may be costly to refinance as interest rates start rising;

3)Prepayment penalties (fees charged for paying the loan off early) could limit your ability to get out of an unfavorable loan without substantial penalties; or

4) If your credit rating deteriorates, you may no longer qualify for the best rates.

Be cautious of lenders who want to steer you toward a particular product and make predictions about the future direction of interest rates. Telling you that you can always refinance at a later date is, in effect, making such a prediction.

What you should ask the lender:

• How soon after I get the mortgage can I refinance?

• Are there penalties if I pay off the loan early? • What is the dollar amount of the penalty?

• If the value of the house falls by 5 percent, for example, will I still qualify for the same type of mortgage when I refinance?