You would consider refinancing only when going gets tough and making ends meet becomes difficult with credits looming over large on you; and you are in a debt trap with creditors calling on you day-in and day-out. Refinancing is your option if it helps reduce your net monthly outgo. Weigh the pros and cons of the option and keeping in mind, the hard facts of life.
Some Key Points to Ponder
1. Reducing your monthly installments. Multiple credits and mortgages bog you down with accumulated interests. A reasonable refinancing reduces the monthly outgo and the number of checks to write for a similar period.
2. Breakeven time. Although it depends on multitude of factors, sooner the breakeven the better.
3. “Points” to ponder. Points are onetime percentage costs included into your mortgage. Higher the point lower will be the interest rate. Make a judgment depending on your situation.
4. Risk reduction by paying off high cost flexible interest refinance.
5. Weigh the option of high closing cost with lower interest rate against no/low closing cost with high interest over the same or lesser period.
6. Consider refinancing if you can generate some extra income through refinancing. The comforts of additional resources cushion your efforts to see off debts quicker than you imagined. If not, it is going to take you from bad to worse.
7. You can refinance that portion of the debt which was shared by your spouse before divorcing.
8. Secured refinance gets you lowest interest. You can use your home equity to secure refinancing.
9. Tax matters. Taxation differs when you switchover from one credit to another or when you refinance an existing loan. Consulting an expert must be your top priority.
10. Paper work. None of the above points hold well, unless you got all your requisite papers in place.
Don’t haste through the steps. Keep in mind this is your last straw. Check the credentials of the lender before you sign on the dotted line. It takes a very hard effort to keep away from scrupulous operators. Speak to their customers to get an insight. Understand their processes before committing yourself. Better still, take notes and compare with other lender’s credentials. With due diligence, and keeping the key points in mind, re-financing, is afterall not a big eye-monster that is hard to tame. Once that re-financing monster is tame, your financial status should recover in no time.