refinance

When refinancing is not a good idea

Just because mortgage refinancing loan rates are still in the low single digits doesn't mean you need to jump at refinancing your home. While there are many good reasons for refinancing a mortgage, there are four solid reasons you should not.

  • Property value is going down. Don't refinance a house that is sinking in value -- you don't want to end up with a dreaded "upside-down" mortgage if property values should plummet even more.

  • If you plan to move soon. If you plan to pack up and leave your home in the next three to five years, stay put in your current mortgage because any monthly savings will probably not exceed the cost to refinance.
  • You are almost finished repaying your mortgage. If you are almost at the 30-year (or 15-year) finish line, don't refinance because you'll start from scratch when you take out a new loan; remember, the later years of your mortgage payments apply more to the principal than interest. Also, look at the fine print of your current mortgage for any prepayment penalties -- another reason to stay put.
  • You've tapped a lot of equity in your home. If you have dipped into the equity of your house -- through a second mortgage or home equity loan -- you may want to think twice about refinancing your loan. It is rare that a lender will refinance for 100 percent of your loans, especially in this economic environment.

While the mortgage refinancing loan rates are still at historic lows, it doesn't mean refinancing is the best option for your situation.

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