The temptation to refinance a home mortgage is a trend sweeping across the country. With mortgage rates at record lows, a lot of people can save hundreds of dollars per month. Others, can refinance out of their ARM (Adjustable rate mortgage) loan to a more stable fixed rate loan. You, however, must decide whether or not refinancing is the best choice for you.

You must consider the cost associated with refinancing. The first being interest. The principle used for mortgage refinancing is that you pay a large portion of the interest early in your payment schedule. If you choose to refinance early, you will probably have lower payments but will also be losing equity. You must plan to live in the home a long enough time to make it worthwhile. If you do not you may be losing money in the long run and lose equity.

Often people who seek refinancing constantly are always happy to negotiate a smaller interest, with a lower monthly payment. They could however just be setting themselves up for a longterm financial crisis. If they traded their current payment for a lower payment but an extra 5 or 10 years added on to their mortgage, they probably did not save any real money. The interest cost from adding 5 or 10 years on a loan would probably take away any savings thought to have been gotten from getting a lower mortgage rate. They are putting more money in other peoples pockets to stay in their own home, instead of paying for their home.

You should only refinance if it can reduce the total amount of debt you owe. In some situations refinancing may not be the answer, especially if it involves extending the mortgage length. The amount you spend on the added interest and principal for those years may not be worth it.

Some hidden and associated fees involved in refinancing include:

Credit Report
Document Preparation
Escrow Fee
Title Policy

All of these fees need to be known about prior to closing day. Determine if it is still a financially wise decision, including closing fees, to refinance your mortgage. Mortgage rates are at a record low right now, use the internet to quickly compare lenders, and their quotes.
-M Petrone

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