You can refinance your mortgage for many reasons. Some mortgages are set up so that the borrower pays only so much for so long, and then boom, their payment explodes. This is seen especially in those with adjustable rate mortgages (ARMs). It would behoove those borrowers to investigate the possibility of refinancing their mortgage to end up with a lower monthly payment.
Or perhaps you have some credit card debt that you have been trying to pay off. Again, it would be in your best interest to consolidate your debt into one monthly payment and pay off those high interest cards with a lower interest rate, such as that you would get from refinancing your mortgage. You can also use the extra money to pay for improvements on your home, college tuition, unexpected medical bills, etc.
Some questions you will want to ask yourself before you refinance:
• How long will you live in the house before you decide to move? If it is a
short time than it may not make sense to refinance as you do have to
pay closing costs, and therefore it will end up costing you money.
• Can you afford to cash out equity in your home? If using the money for
medical expenses, or college tuition, etc. it is a good use of your money.
However, a vacation is not necessarily where you want to put your hard
earned money.
• Can I stop spending? If using it to pay off credit card debt, just be
aware that this is just to help you get out of debt, not to clear off your
cards so that you can spend more. There is a difference. If you don’t
think you can stop spending, then don’t get the loan. It will only hurt you
in the long run. ■
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