| By :
Nick Messe
Getting a mortgage refinance should only be done for a very good reason. There are many complex factors that affect you and your credit rating when you take out loans or mortgages. Some are positive and beneficial, others are not. Another factor in which you have no or little influence is how a mortgage company handles your business and application. Refinancing mortgages can be accomplished several ways, including a refinance mortgage, home equity loan or home equity line-of-credit (HELOC) loan. There are some obvious advantages that can occur if you refinance your mortgage at a lower interest rate. Here are some positives that could happen if it is done correctly: - Lower monthly payment
- Shorter mortgage term
- Increased savings
- Lower interest rate
- Freedom from high interest rate mortgage
- Fresh start There are also some negatives that could happen if it is done incorrectly: - Application, closing costs and other fees eliminate savings
- Adverse effect on your credit report and credit score
- Denials
- Identity theft
- No savings at all
- Higher monthly payment at same term The lists can be expanded, but you can understand from seeing just these few items how refinancing a mortgage must be done carefully, and only through a reputable company that you know is reliable and honest. You can always check companies out with the Better Business Bureau if you are unsure. If you are locked into an existing mortgage and have a decent interest rate and terms, there is little reason to disturb the status quo. By making changes, you may be ending a good relationship with your current lender, and terminating what actually was a good deal on the mortgage. Closing costs on refinance mortgages can be as much as those for a new mortgage. You may be required to get a new appraisal. The appraisal may be much lower than your previous appraisal due to current market conditions. Even if you do not refinance, you still must pay for the appraisal. You may not have as much equity in your home as you think, or your home may now be worth less than you can refinance. There are some refinance loans that have no closing costs, such as VA loans and home equity loans. If you stay with your current lender, there may also be breaks on costs. If you apply at an Internet website, you run risks of identity theft, many hits to your credit record as they search for lenders, and hidden fees may make the new loan highly expensive and detrimental. If you move to an adjustable rate mortgage refinance (ARM) and out of a fixed rate you currently have, your payments could skyrocket. Only do a mortgage refinance for a very good reason. If you can achieve lower payments, lower interest rates, or a shorter mortgage term without incurring additional high costs, it is a good reason. Consider carefully why you want to disturb your current mortgage before you act.
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