Thinking about refinancing your Home Loan?

You may want to rethink that!

Does refinancing your home loan really make sense? Sometimes, but more often than not it does not, however, people are doing it everyday because they do not know any better.

Most people refinance their home loan to lower their interest rate. They accrue additional closing costs to do this and see a lower interest rate on paper but did it really lower their interest rate they are paying? The answer might surprise you!

Over the years most of us have been taught that any time you can reduce your interest rate by two points or more this is a good thing, but is it really? While in theory this may seem like a good thing to do, most of the time it simply does not make since to do so. Here's why...

All loans are set up and amortized, which means, that the financial institution you have your home loan with has established a set amount of interest you pay per day on your home loan. They then front load your loan so that you pay back all of the interest first. That means that you are paying back the highest amount of interest at the beginning of your home loan and pay less interest as time goes on.

So lets say you have been in your home loan for 5 or 6 years and you decide to refinance. You paid the highest amount of interest on those first 5 or 6 years right? So what do you suppose will happen when you refinance? You guessed it you start the process over again paying back the highest amount of interest possible on your loan. I picked 5 or 6 years because this is the average amount of time today that most people stay in their loans before they sell or refinance. Can you see why most of the time it does not make since to refinance?

Before you consider refinancing you really should know exactly how your existing home loan works. Have you ever seen your amortization schedule on your home loan? You may want to look at it.

By the way, I have a free report that I make available for my readers to better understand exactly how their home loan is really working and before you decide to refinance I recommend that you get it and read it. Click here to get yours today.