5 Reasons a Refi Can Be a Losing Endeavor

Posted on Nov 24 2017 - 4:51am by Expert-Zine

Person writing Mortgage Refinance with black marker on visual screenRefinancing has been in vogue for many years now. After all, who can blame homeowners for trying to snag better interest rates these days are historically low. Then again, this kind of loan isn’t for everyone. Before you reach for a home mortgage calculator in Salt Lake City, Denver, or Houston, find out if you’re in any of these situations:

When Your Current Home is a Temporary Residence

A refi can be disadvantageous if you don’t intend to stay in your home for good. You may not be able to recoup its associated closing costs when you decide to take another mortgage down the road. Make sure your current residence is your permanent one before you consider refinancing.

When Your Existing Rate Isn’t That High

A lower rate doesn’t always mean better. In some cases, the savings you can potentially get from a refi aren’t worth your while. To see whether reset the clock on your mortgage, do the math to find out when is the break-even point with regard to the overall refinancing cost.

When Your Credit Score Isn’t That Great

Refinancing is no different from applying for a new loan. Lenders will check your creditworthiness to determine whether you qualify or not. If your credit score is far from perfect, you may not be eligible for the lower rate you want.

When Your House Has Been Listed Recently

Listing your property for sale sends a bad signal to lenders. It means you’re trying to get rid of your home, making you a less desirable borrower. To keep the listing from becoming a hurdle, remove it and wait for about half a year.

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When Your Mortgage Is Underwater

If the cost of your existing mortgage is higher than your home’s value, it’s nearly impossible to apply for a refi. Government loans may allow refinancing with negative equity, but the requirements may be hard to meet.

A refi is a specific financial product for specific homeowners. It can turn your life around if you’re currently paying an astronomical interest rate, but it may do little if your situation doesn’t ask for it.