Why Should You Refinance Your Mortgage?
By Cynthia Tabernacki
05/13/2006
Unexpected expenses can arise at any time. Emergency house repairs, vehicle maintenance, or a new child on the way. All sorts of things can happen that require some added resources to get you by. One very viable solution is refinancing your home mortgage to free up some extra capital to pay these things off and also to have additional cash-on-hand, just in case.
Before you can refinance, you need to assess your total liabilities. Figure out what your interest rate is on each of your home loans and how much you owe. Be careful to not refinance at a higher rate than your current mortgage plan, as it can cost you thousands. Next, figure out what debt you wish to consolidate under your refinanced mortgage, and how much extra cash you will need. This can also include home renovation projects you wish to take on. Besides debt consolidation, refinancing may lower monthly payments, reduce your interest rate, reduce risk and even lower your monthly payments. Generally, getting a lower interest rate and lowering your monthly payments go hand in hand. Consolidating high interest credit cards under your mortgage will also simplify your payments and reduce costs.
The opposite is also true; some people prefer to make larger payments and pay their mortgage off faster. This can be because your income level has increased and you want to reduce the total interest paid on the loan. Refinancing might be the answer if you lack the discipline to make voluntarily higher payments on your own. However, it would be simple enough to just pay more each month and avoid the risks associated with refinancing and then losing a job, etc.
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