Thinking of refinancing your mortgage? If so, then you should know that it’s not a great idea. Wondering why? Here we have mentioned reasons why you should avoid opting for this approach.
Savings Become Challenging
You will not be able to save money if you refinance your mortgage. If your financial conditions have not changed after you have taken the first loan, then you may don’t have any greater change in monthly payments or interest rate. It is important to note that there are fees of refinancing that you need to pay at the time of applying for it. Thus, you need to determine how much money you have to save to pay for the fees instead of weighing how much money you are willing to spend monthly.
High Costs
The most unpleasing disadvantage of refinancing your mortgage is the amount you need to pay to avail of the new loan. Generally, it ranges between $3,000 and $6,000 or more. This also depends on the amount of the new loan, your lower interest rate, and your discount points. Not to mention, this expenditure shows what you have paid on the first mortgage. In a nutshell, you will be paying again to purchase the same thing.
Delayed Mortgage Payoff
In typical refinance conditions, you get more time on your loan. For example, in your 30-year loan, you have paid for five years. When you refinance your mortgage, you will add five years back on your loan term. This means you will own your home for five more years unless you have to make additional principal payments. But if you stay with your current mortgage and pay your requisite payments, you can become loan-free in 25 years.
Refinancing Your Mortgage Takes Time
If you think that your application for refinancing will get approved the same day you apply, then you are wrong. Refinancing your mortgage is not a task that you can do in a single day. You will need time, resources, and money to secure a lower rate before applying for the loan. Some lenders also refuse to give more loans on your mortgage. There can be several reasons for it. For instance, a person who always makes delayed monthly minimum payments can get refusal on their refinancing application.
Bottom Line
Refinancing your mortgage simply means making your financial situation more unstable than before. You need to pay more premium payments for your new loan. Apart from this, you need to use all your savings to pay the fees of the mortgage loan. This is why it’s better to avoid refinancing and try to pay your current mortgage loan.