Does Mortgage Refinancing Just Prolong Your Debt Problems?

James Henry Abrina By James Henry Abrina, 2nd Sep 2010 | Follow this author | RSS Feed | Short URL http://nut.bz/2672959v/
Posted in Wikinut>Money>Mortgages

Mortgage refinancing can be helpful in terms of giving you more time in paying. But is it worth the risk of a much higher interest?

Does Mortgage Refinancing Just Prolong Your Debt Problems?

Paying for a debt for more than 20 years can be a gruesome task for most families. That is a good reason why most couples opt for mortgage refinancing. Considering all the financial, psychological, and emotional advantages that loan payments without pressure can bring, who would think twice?

Refinancing your mortgage is perhaps the wisest thing to do if some certain circumstances demand for a lighter load. For example, you bought your dream house for a specific amount payable in, say, 20 years. That does not guarantee you though that you will not get demoted or worse lose your job within 20 years, or your business will not stay in bloom during this period. Things change, especially given so long a time as 20 years. Your livelihood may suffer and your family can go bankrupt unpredictably. How can you get an assurance that you can pay your mortgage in full within 20 years? This is where mortgage refinancing comes in.

Mortgage refinancing or renewing your loan allows you to pay your previous loan in shorter terms and lower interest rate, thus providing the debtor a rebound and giving ample time to work on the bank accounts and family finances. You do not just snap into the whole idea though. There are technical information you must take note of:

Consider the ARM - This stands for Adjustable Rate Mortgage and it should fit your needs. When refinancing mortgage, ARM is one of the most vital aspect that you must carefully check and decide on. This works within your payment capacity. How? The loan's ARM feature determines for how long the interest rate would remain the same as per the lendee's time frame.

Debts, debts, debts! One good thing about refinancing is that you can consolidate all your loans and pay them as one monthly. This cleans up your bill statement racks and saves you time from going from one payment centers to another. In other words, there are lesser complications.

Cash out. Refinancing is a good step to take in times of dire need. If you are dealing with heap pile of expenses - school fees, medical bills, home renovation, plus old debts due too soon - you can file a cash-out refinancing mortgage that is higher than your previous one. This way, you can settle all the expenditures including the loans that have been dragging you for years.

As much as loans are a heavy burden to a borrower, mortgage refinancing is a timely answer to end your financial struggle that has been going on for quite some time now. Although it is still best that you do not owe anyone any amount at any given time, it is better that you owe one and are able to pay the lender accordingly. Just remember to always be wise.

Tags

Amortization, Bank, Cash, Debt, Finance, Housing Loan, Interest, Loan, Money, Mortgage, Refinancing

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Comments

author avatar Rose*
22nd Nov 2013 (#)

It's worth refinancing if you can get a lower interest rate. If you are just doing it to withdraw equity from your house, it's a bad idea.

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