Many homeowners are understandably frightened by debt in the current unstable economy. Thousands of people across the country have lost their homes through foreclosure. With a threat so real, many homeowners are taking the opportunity to refinance with the hopes of paying off their mortgage loan sooner. However, considering that interest rates are currently at record lows and the values of property are still unstable, refinancing at the moment might not be wise.
In the first quarter of 2011, 75% of all homeowners who opted to refinance ended up paying additional money at closing to reduce their balance. Most financial experts agree that paying more money at closing in order to be rid of debt faster isn’t necessarily a smart move.
When Is It Right?
However, just because refinancing might not be a good decision for everybody doesn’t mean that it’s not a good decision for some. Most people who are looking to refinance are those who are nearing retirement and would like to get their house paid off before that happens – and that can be a smart idea. In general, it’s a good idea to refinance if you already have an emergency fund of six months to a year in cash, have other retirement savings in plan, and are looking to stay in the house for at least another ten years. Alternatively, it might not be a bad idea to try to refinance if the balance left on your home is so low as to not upset other financial goals.
It’s important to have your mortgage under control, and being debt-free is a dream of many people. Just be sure not to throw everything under the cart on your way to paying off your mortgage!