Re-Financing Your Home-Cost-Effective Or Money Down The Drain?

March 12, 2009 by  
Filed under On Your Mortgage

Debts are becoming a sore point for many householders who just cannot find the extra cash to pay the mortgage. Maybe you are in this dilemma and are looking to find a way out. Refinancing your mortgage is an option many turn to but is it the right one?

Refinancing your home enables you to comfortably pay your monthly mortgage payments and essentially free up some of the capital of the worth of your home. However, with this additional loan and the interest which accompanies it, you are shelling out for a whole new set of interest fees. This means that you have to be sure to find a loan with a very minimal interest rate,

There are a variety of mortgages and some lend itself to the necessity of refinancing more than others. Such a mortgage is the ARM mortgage or adjustable rate mortgage with interest rates that rise on a consistent basis. Refinancing on this plan can allow you to begin a fixed rate and avoid increasing payments. Those with a fixed rate already in place can also refinance providing a lower rate of interest is attained.

It is not, however, a smart idea to extend the mortgage solely for the purpose of reducing monthly payments because in the long run, you will be paying excessively on interest.

If you are insistent on refinancing your home consider all the implications on the overall costs. Financial advice doesn’t come cheap and there are various fees involved n the process such as Private Mortgage Insurance and recording fees not to mention surveyor costs.

If you have other debts such as credit cards and overdrafts that are incurring high interest charges and fees eating up your available cash and cannot save money to pay for them, you may wish to apply for a loan known as the cash out financing agreement. This type of loan includes borrowing a higher amount you currently owe.

There are a few resources available online to calculate the viability of a refinancing loan taking all relevant factors into consideration, your lender may also allow you access to this resource.

If you intend to move home in the next five years, refinancing is probably not a viable option as you will take around this length of time to recover your costs.

Refinancing is a risky situation if there is a likelihood at some point, that you may not be able to repay your monthly payments. In this instance you may be at risk of foreclosure and lose your home. However, with the correct information and informed actions, you can release the stress and headache from your financial chaos and start living again.

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