Mortgage Refinance Help - When Is it a Bad Idea?

Seeking mortgage refinance help can prevent you from facing a default or foreclosure on your property. Unfortunately, there are a number of downsides to going through the refinance process. These include fees, credit penalties and even a potential loss of equity in the home. Refinancing is more often a bad idea than a good idea.

Costs Outweigh Rewards

The costs of a refinance will outweigh the rewards in a number of circumstances. Instead of thinking only in the short-term, evaluate long-term costs in both scenarios. You may find that the refinance offers you a lower interest rate but a longer repayment period, driving up the total cost. On the other hand, a lower monthly payment may come at a higher interest rate, causing you to lose money.

Mortgage is Already Affordable

Because of the high cost of refinancing, it is almost always better to repay a mortgage on schedule with an existing lender. This is particularly true if you can afford your current mortgage. Refinancing only in an attempt to capture lower rates or cash out will rarely pay off. Refinancing to prevent foreclosure may not be avoidable, but refinancing just to try and save money is rarely necessary.