The decision has been made to refinance your home. Great! There are many reasons to refinance, and no doubt you have your reasons too. Most times, when done correctly, refinancing can be very beneficial for property owners looking to leverage their equity. But, there can be some hazards associated with a home refinance loan. Today, we're going to take a closer look at a few of these risks.
Associated Risks in Refinancing:
1. A common practice when refinancing your mortgage is to extend the length of your loan term, but with a lower rate than your existing one. Depending on your situation, this type of refinance can result in you paying more than your original mortgage over the long run.
2. If you plan on drawing on the equity of your home to pay non-mortgage debts, like unsecured credit lines, car loans and the like, pre-plan a new, affordable monthly budget before finalizing your decision to refinance. Otherwise, you may find yourself in the same dilemma a few months later, but without the option of refinancing your home to pay off these outstanding balances.
3. Some people prefer an open mortgage option, which allows the homeowner to pay for the existing mortgage without penalties any time before the contract expires. This may be a delicate situation to effectively manage since interest rates are rising and falling all the time. If you decide on this type of loan program, you need to keep a close eye on your lender's interest rate and consider switching to a fixed rate mortgage once interest rates trend up.
Refinance Hazards: Are You Willing to Take Them?
Because you are still reading this article, it's safe to assume that you have considered the pros and cons of home refinancing. You have been over them methodically one by one, so now - are you OK with the risks?
You should also be aware of the potential penalties that refinancing can incur, clauses in the contract that your lender have over your old mortgage, as well as the general unpredictable nature of interest rates. Review the agreement on the existing mortgage and determine if refinancing will not result in penalty should you decide to pay it down or pay out completely. Some clauses can prevent you from refinancing altogether. It's better to be aware of these concerns early in the process and see if you can do something about them. A trained mortgage agent can provide good advice if you are unsure.
Depending on your situation, the cost of refinancing may simply end up being not worth the effort. Legal and bank fees can sum up into a significant amount at closing. Skilled mortgage agents can help reduce these fees, but it is good to be aware of them prior to inking your mortgage.
Refinancing can be very beneficial, but the financial dangers should not to be quickly dismissed. After all, your home is an investment. Go over your current financial situation, is refinancing worth the hazards? Determine your short term goals, long term goals, is refinancing worth it?
No doubt that you can achieve refinancing bliss. If you are unsure, consider speaking with a mortgage broker.
Associated Risks in Refinancing:
1. A common practice when refinancing your mortgage is to extend the length of your loan term, but with a lower rate than your existing one. Depending on your situation, this type of refinance can result in you paying more than your original mortgage over the long run.
2. If you plan on drawing on the equity of your home to pay non-mortgage debts, like unsecured credit lines, car loans and the like, pre-plan a new, affordable monthly budget before finalizing your decision to refinance. Otherwise, you may find yourself in the same dilemma a few months later, but without the option of refinancing your home to pay off these outstanding balances.
3. Some people prefer an open mortgage option, which allows the homeowner to pay for the existing mortgage without penalties any time before the contract expires. This may be a delicate situation to effectively manage since interest rates are rising and falling all the time. If you decide on this type of loan program, you need to keep a close eye on your lender's interest rate and consider switching to a fixed rate mortgage once interest rates trend up.
Refinance Hazards: Are You Willing to Take Them?
Because you are still reading this article, it's safe to assume that you have considered the pros and cons of home refinancing. You have been over them methodically one by one, so now - are you OK with the risks?
You should also be aware of the potential penalties that refinancing can incur, clauses in the contract that your lender have over your old mortgage, as well as the general unpredictable nature of interest rates. Review the agreement on the existing mortgage and determine if refinancing will not result in penalty should you decide to pay it down or pay out completely. Some clauses can prevent you from refinancing altogether. It's better to be aware of these concerns early in the process and see if you can do something about them. A trained mortgage agent can provide good advice if you are unsure.
Depending on your situation, the cost of refinancing may simply end up being not worth the effort. Legal and bank fees can sum up into a significant amount at closing. Skilled mortgage agents can help reduce these fees, but it is good to be aware of them prior to inking your mortgage.
Refinancing can be very beneficial, but the financial dangers should not to be quickly dismissed. After all, your home is an investment. Go over your current financial situation, is refinancing worth the hazards? Determine your short term goals, long term goals, is refinancing worth it?
No doubt that you can achieve refinancing bliss. If you are unsure, consider speaking with a mortgage broker.
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