Should You Avoid Mortgage Refinancing?

refinancing benefits

Is there ever a time that you should avoid mortgage refinancing? How do you know? If you could save money, doesn’t that mean that you should automatically plan to refinance? Not necessarily and you should know that many homeowners are choosing not to refinance their mortgages at all. Here’s a look at why.


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Some homeowners like to live in their home for a couple of years and move on. This is natural and fine, but if you are one of these people, then you’re going to do yourself a great disservice if you choose to refinance your current existing mortgage. You should instead choose to work with your lender if you’re having a financial hardship and get a second job if you need additional money because if you cannot recoup the money you spend on fees, then it’s not worth it to refinance.

Refinance or Keep Your Existing Mortgage Loan?
If the market value of your property has dropped, you might choose to sit on your existing mortgage loan instead of refinancing. There is nothing more daunting than to realize that your biggest investment has lost value, but it’s happening all the time. In order to get a really good mortgage refinance rate, you need to have about 20% equity in your home and if you home’s value has dropped, then you might have negative equity and that’s a bad scenario all the way around.

If this is your situation and you are facing financial hardship, you should also talk to your lender to see what other options you might have that will help you to avoid losing your home and when you’re able, work to pay down some of the principal of your loan so that you can rebuild your equity.

If you have less than 15 years left on your mortgage, it is not a good idea to refinance your mortgage loan, because you will wind up paying more interest on a loan that is nearly paid off. Instead of getting a mortgage refinance if you are struggling with your finances, you should look into other ways to cut back or eliminate other forms of debt so that you can continue to focus on paying off your home loan.

Another reason that many people choose to refinance their mortgages is that they are in debt and need cash to pay for things such as credit card or medical bills. You need to know that financially speaking, this is a big no-no. Now, sometimes, we find that due to job loss or cut backs, we are in a financial situation where we are struggling to pay our other debts, but you should consider talking to these creditors and finding ways to pay off the balances through them and leave your mortgage alone if you can.

You should also know that if you have no equity in your home, you should never try to refinance your home, because you won’t get the rate you are looking for and you can’t over borrow. Should the value of your home drop too much, you will wind up that you owe more than your home is worth and you’ll be stuck with a financial situation that you cannot get out of. Instead, consider alternative ways to get cash to help you make your ends meet, such as getting a second job or selling some things you have in your home. This might not be the most pleasant alternative, but you will be able to avoid financial catastrophes this way.

You should also know that mortgage refinancing is not for those who have bad credit unless you can refinance solely on your payment history. So, if you have made all of your mortgage payments on time for the past year and are not behind at all, then you could consider refinancing based solely off your payment history, but you need to know that a mortgage is the biggest way to offer you a credit score, so if you’ve been paying on time, you will likely have decent credit to use.

For many people, mortgage refinancing has been a bonus, but for many others who consider taking this route, it just isn’t a viable option. If you are in a situation where you are considering a mortgage refinance, then you should consider every aspect of your situation carefully before you commit.

Gina Wilson

Another post from Gina Wilson – Credit & Loans Specialist Blogger.

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