Mortgage refinance can be a costly, disastrous decision if it is done incorrectly. However, there are many benefits that can be had. Here are some good reasons people refinance their homes, and some bad habits that some homeowners have when they are refinancing.

Good Reasons:
-Get a lower interest rate, or a lower monthly payment. A lot of people need or want to pay less for their home every month. Especially in this economy, a lot of people need to lower their payments to an affordable level before they lose their home to foreclosure or mortgage default. If you are able to get a lower mortgage rate, your payments will drop. It may even be possible to get lower interest rates, and extend the length of your home loan.

-Cash back refinancing may be a great way for a homeowner to use the equity they have built up and get a large amount of low interest cash. This money can be used for home improvements, hospital bills, tuition, or anything a homeowner wants. This money an often be gotten at a much better interest rate than a personal loan would be at. Always remember though that all of this money will need to be paid back eventually. Do not borrow more than you need, and truly have a good plan of what to do with the money.

-Changing loan types can be a good reason to get refinancing. Many homeowners have an adjusted rate mortgage (ARM) and would like to get into a better, more stable, fixed rate home loan. Refinancing will give a homeowner the opportunity to get out of their ARM loan and into a fixed rate mortgage. A lot of people like the security of knowing that their home loan payments will not change from month to month, or as market conditions change.

Bad Reasons:
-Do not refinance too often. Refinancing is an expensive, time consuming process. Do not refinance too often or you risk losing any of the potential benefits to closing costs and fees. Sometimes a homeowner realizes how much they are saving, and is anxious to refinance as soon as possible. However, always think about the closing costs and fees, as well as your break in period. If a refinance will save you $200 per month, but costs $2000, it will take 10 months to recoup those losses. Always be aware of refinancing too often, and make sure you will truly be benefiting.

-Do not refinance unless you can get a lower interest rate. There is no reason to want to refinance a mortgage unless you are able to obtain a lower interest rate. Even when getting a cash back refinancing, you should try to get a better interest rate.

-Never refinance a mortgage just because of things you hear from friends or the news. While refinancing is extremely popular right now, it may not be good for everyone. Only you will know what your financial position and goals are. Instead of refinancing on a whim, have a plan that will advance your future goals.

-M Petrone

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