Thinking about Refinancing

Not everyone is facing tough times.  For some, situations have remained relatively positive.  Those in a position to do so may consider refinancing in order to lower their payments and/or interest rates.  For those hopeful for a lower payment or who have been thinking of doing some home improvements, this can be a great way of tapping into the funds you’ve already put into your home.

Is Refinancing Right for Me?

For those people who do not plan to stay long in their homes, refinancing can be a way of lowering payments so that one can begin putting money aside on a new home purchase.  Since there are no plans to keep the home long enough to pay off the loan, one does not have to worry about the accrual of additional interest from loan modifications that affect the length of a mortgage.  Those who are financially stable and have a large amount of equity built up in their home could also consider a home equity loan to tap into the cash value of their home.  However, those who are facing high credit card debt or the possibility of a financially-unstable situation are cautioned against pulling equity from their home as there is more at stake in the event of a financial stumble.  Another group of people who may consider refinancing are those whose credit has improved since they purchased their house.  Better credit means lower interest rates and lower payments, which means more money goes into the homeowner’s pocket and less into the lender.

Refinancing is not for everyone, however.  Experts recommend that homeowners very close to paying off their homes explore other options as opposed to refinancing.  Since home loans generally favor terms in which the interest is paid before the principle, homeowners can actually lose money by refinancing a nearly-paid home.

However, a home loan modification can be a great way to take advantage of a good or improved financial situation.