WITH lessons learned hopefully, let’s start with why you should not refinance your loan.
Going through the home refinance process may seem like a good idea to save money or to get money for home improvements or other purposes, but there are some instances when you should not refinance your home.
By understanding the situations where getting a refinancing loan is not such a good idea, you can better understand when you should look into the home refinance process. What are some of the reasons why you should not refinance your home?
To pay for a vacation or other consumable purchase.
If you are going to refinance your home to take a vacation or other purchase, this may not be such a good idea. When you refinance your home, you are taking out a loan for a time period of 15 to 30 years. If you use the money for a vacation or other purchases, then you are in essence paying for it for the entire length of the loan. That is not a smart move, simply because it is throwing money down the drain, because it is a purchase that will not last.
The economist is saying that the velocity of money is minimal. Meaning, the turn over of the money supply is not going around. People are saving, people are paying off debts/loans and most people are not spending. We all have to learn to go with the flow.
Paying off a car is questionable, depending on what interest rates you are paying for both and your tax benefits.
You will not break even with closing costs and interest rate.
Make sure that you are going to stay in the home long enough to recoup your closing costs and refinancing fees that you have to pay. By considering the lower monthly payment and how long it will take to make up the closing costs that you are going to pay, you can make sure that you will stay in the home long enough to recoup the costs of refinancing. Evaluate this carefully to ensure that it will be worth the money that you will have to spend to refinance your home. Best advise is to get a refinancing without any closing cost. Borrowing money now is cheap because its not easily available due to stringent lending guidelines.
To pay off credit card debt without addressing the spending problem.
Refinancing your home to pay off your credit cards, only to rack up the debt again is not a reason to refinance. If you do not address the spending issues that you and/or your spouse have, you will not do any good in the long run. You are putting your home at risk and are possibly setting yourself up for bankruptcy in the future. You are exchanging your short-term debt for long term debt that you are going to have to pay for up to 30 years. Addressing the spending issues that you have will help your refinancing decision to be a sound one, rather than just a quick fix. Cut up the credit cards or make other changes that will keep you out of this situation in the future.
A home refinance loan may sound like a good idea, but it is important to evaluate why you are getting the loan to ensure that it is best for your long term goals. Make sure that it is a sound financial decision that will help you in the future, rather than make your financial situation more tenuous. By considering the reasons why you should not refinance your home, you can better determine if your reasons are financially sound for you and your family. Remember, again it should all boil down to your cost to refinance, compare rates and fees viscously with different lenders, get quotes in writing and make sure your guarantees are in writing too.
To cash out to buy another property for investments.
This one is definitely case by case because it will depend on what your are buying and where you will leave your financial situation at. I suggest a detailed evaluation in regards to this issue. Now, as a lot of you have remembered, I strongly was against this two to three years ago. But now with home prices being very affordable and with rates at a all time lows, it’s time to consider.
Now, if you have an interest rate of over 5.00% or higher it is important for you to call to find out if you can lower your interest rate to cut down your payments. Even if you have no equity, Freddie Mac and Fannie Mae have options for loans to go up to 105% refinancing without cash out. Call for details.
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Please call for any inquiries or comments, call Ken Go of 1st Innovative Finance Group at (562)697-7028 or write to This e-mail address is being protected from spambots. You need JavaScript enabled to view it .
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