Should I refinance now or wait for Pre-pay?

We are asked quite often about whether or not its worth refinancing and paying off the Pre-payment penalty now or waiting until the Pre-payment penalty is up. There are many considerations to take into account and are important to discuss with a mortgage professional. Here are some ideas to discuss:

If you have an adjustable rate and your payments have already started to rise, it may be smart for you to refinance before the pre payment penalty is up.

If you are having a difficult time making the higher payments, you should refinance as soon as possible. Missed or late mortgage payments will lower your credit score and could prevent you from refinancing when your pre payment penalty is up.

Don't get "sold" on the tax benefits of the tax deductible interest that accompanies the pre-payment penalty. You'll need to determine your tax rate to see if the tax deductible interest makes sense.

If your prepay penalty is a small amount and refinancing now to lock in a low interest is in your best interest as opposed to waiting for a prepay to mature. If you don’t mind rates being a bit higher and do not need cash out from your property than waiting will save you on having to pay a prepay penalty.

An experienced loan officer can help you determine and make an educated decision as to whether refinancing before your pre-payment penalty is up will or can be worth it now and in the long run. What are the rates doing and what are they expected to do? What is your current financial situation? What type of mortgage do you currently have? How much longer do you have on the term of your prepayment penalty? How much is your prepayment penalty? These are all very good questions that will play a role in the decision of whether to refinance now or wait until you penalty has expired.