Knowing When Is It Not The Best Refinance Time
Mortgage refinance may be a good thing you can do to reduce your burden of debts
. Although it does not automatically rid you of your debt, you have the option of restructuring or extending the term of your loan to suit your current financial situation. However, mortgage refinance may not be the best solution for all individuals who are having problems keeping up with their mortgage payments. Getting a second mortgage on your home might work for some but for others it might be a trap that may get you deeper in debt than before. Therefore you might want to know when is it not the
best refinance time so you may avoid making a mistake that might cost you a lot of money in the future.
Many experts generally may advise you to get a second mortgage on your home only if you can get the best refinance rates that are beneficial to you in the long run. After all a second mortgage is not a short-term solution. There are times when you probably should strike off or at least put your plans for a mortgage refinance on hold until the time is right. One such time may be when you have been paying off your current mortgage for a long time. For example, if you are already 10 or 15 years into your 30-year mortgage, you may only increase your costs if you decide to refinance now. This is because you are probably already paying back the principal amount of your loan so if you refinance now you may have to start paying back interest again when you are probably already halfway through your principal amount payment. If you only have a few short years left to complete the repayment schedule, it may be wise for you to stick with it until the payment is complete and you have total ownership of your home.
Generally the main reason to refinance is to enjoy a lower monthly payment as the interest rate may also be relatively lower. But in order to enjoy a significantly lower interest rate, you may have to make sure that your credit score is at an acceptable figure. If your score is so low that you have to get
refinance help in order to even be eligible for a second mortgage, chances are you may not get the advertised low interest rate. Low interest rates are usually reserved for applicants with good to excellent credit scores. You may want to at least make sure that your credit score now is higher than when you first applied for a home mortgage. If it is considerably lower, it may not be the best time for you to refinance because lenders or mortgage providers may categorize you as a high-risk applicant and may charge you a higher interest rate.
If you are planning to move out of the home for which you intend to get a second mortgage, it might not be a good idea for you to consider getting a second mortgage. The rule of thumb is that you intend to stay in the home long enough for you to at least cover the mortgage refinance fees. For example, if your mortgage refinance fee is $2400 but your monthly savings from the reduced payment of mortgage refinance is only $80, it may take you at least 30 months to break even. So if you are already planning to move out before the break even period is up, it might be better for you to stick with your existing mortgage payment plan instead of
refinancing.
It may not be a good time for you to get a mortgage refinance if you are having a hard time controlling your spending habits. You might think that getting a second mortgage on your home may assist you in paying off your other debts such as credit card debts but you may want to remember that a mortgage refinance constitutes putting up your home as collateral. If you keep missing your due payments you may run the risk of foreclosure. So before you decide to refinance your mortgage you may want to consider altering your spending habits and take care of your unsecured debts beforehand.
Circumstances change and so does the time for you to refinance. Simply because it may not be the right time for you to refinance now, it may not necessarily mean that you may never be able to refinance later on in the future. So you might want to consider all options before deciding on refinancing.
by: Ask Bill
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