Making Sense of Refinancing

: Chris Lee Law Firm

  Filed under: Refinancing

Refinancing a mortgage is a hot topic right now as mortgage lenders are working hard to sell homeowners on the idea of lowering their mortgage payment. While a lower mortgage payment is enticing to any homeowner, refinancing isn’t the best decision for everyone.

Considerations

The first thing to consider when refinancing a home is the current state of your existing mortgage loan. Refinancing may not be the best of your foreclosure options if your home is already in default. If you have already missed a mortgage payment, chances are you are not going to be approved for a refinanced loan with a lender. Most lenders carry strict qualifications for approving refinancing offers and defaulting on your existing loan is likely to flag you as a borrowing risk.

Also, consider the amount of expendable cash you have. When you refinance a mortgage loan you will be responsible for paying the out of pocket costs on the loan. Since refinancing a loan creates a new loan, you will be charged appraisal, application and closing cost fees on the transaction. It is important that you have enough cash to pay for these fees when you refinance. If you cannot afford these out of pocket expenses, refinancing may not be for you at this time.

Refinancing a mortgage is also tricky when it comes to the type of loan and its conditions. Not all loans are the same and certainly don’t offer similar terms. Moving from a variable to a fixed interest loan can make refinancing a worthwhile pursuit, but never go from a fixed interest loan to a variable one even if the interest rate is lower. Additionally, refinancing should only be considered if the interest rate on the new loan is at least 1.5 to 2% lower than your current rate. Otherwise, the savings may not be great enough to outweigh the out of pocket expenses and lengthened loan term.


Are you a candidate for bankruptcy?
Would you like to find out if bankruptcy is the right option for you? Try our Free Online Bankruptcy Evaluation. 4 easy steps to see if bankruptcy could be the right option for you!
  • Step 1
  • Step 2
  • Step 3
  • Step 4
Please Select Each Box That Applies To You
Creditor Harassment
Loss of Income
Foreclosure
Disability or Illness
Current Expenses
Auto Loans
Credit Cards
Medical Bills
Payday Loans
Do you have any additional information you would like to share?
Contact Information