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Is Refinancing right for me?
Today's finance and real estate markets
are experiencing a high level of uncertainty
that nobody would have predicted five or six years ago.
This is an important question that is often overlooked
by people who rush to consolidate loans or bills, thinking
it is the only way to get out of debt. They are swayed
by the promises of commercials for companies that say
they can save people thousands of dollars and help them
get back on track financially. It is necessary to realize
that refinancing does not ensure that one will get out
of debt. Unfortunately, most people see it that way.
However, there are many situations in which refinancing
will actually put more of a financial strain on a person
in the short-term. If someone is consistently making
payments on a loan, and that person actually has a bit
of money each month to put away, refinancing might cause
more harm than good.
TIP:
We recommend using a mortgage
calculator to determine if you need to refinance.
When Is Refinancing the best way?
There are three major things, at least in the world
of mortgage loans, that refinancing can be good for:
- First, if a person is looking to decrease monthly
payments, there are refinancing plans that will
allow him to do so. These refinanced loans are usually
easier to qualify for, and they can help people
save more money initially. However, these plans
will generally stretch out the lifespan of a loan,
often extending it to 30 years.
- Second, if a person is not concerned with low
monthly rates, but wants to shorten the length of
time he will spend paying off the loan, there are
plans that increase monthly payments and allow a
person to actually save a considerable amount of
money in the long run, because the shorter loan
term will decrease the amount of interest that will
be paid.
- Third, if someone owns two properties,
refinancing can help them consolidate those home
loans into a single, affordable monthly payment.
There are a number of questions that must be answered
when people are deciding if refinancing will be good
for them. It is best to consult with a professional
on the subject. Mortgage services and credit counselors
will be able to break down a person’s monthly obligations
and decide if refinancing will be beneficial. They can
also point people towards other options such as roll
downs, ARMs, and 125 percent loans.
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