Refinancing your home mortgage has its pros and cons. And you should be aware of both its consequences and benefits before you consider applying for one. Here are some of the possible downsides of refinancing.
Danger No.1: Overpaying on Your Closing Costs
Predatory lenders will tell you whatever you want to hear just to get your business. These unscrupulous lenders often tack a number of inflated and/or unnecessary fees on top of the cost of your mortgage. Some of these charges aren't really disclosed up front so that there's barely any time for you to back out.
Danger No.2: Overpaying on Mortgage Interest Rates Because You Don't Want any Closing Costs
A refinancing application doesn't normally require any money to close. However, one way that some home mortgage providers may make up for this is to give the buyer a much higher loan interest rate. This would end up costing more on your end because of the interest fees that are included with your home mortgage.
Danger No.3: You Might Lose Your Equity
The part that you've already paid for is considered yours. Since you will be getting a totally different loan, you're technically extending the loan even further. So even if you decide to stay in the same property for decades, you would still be making monthly home mortgage for a longer time. You may end up losing money, or losing ownership of your house.
Danger No.4: Negatively Impacting Your Net Worth Over Time
Although refinancing can lower your monthly payments, there's a chance that it will make your loan more expensive because you are adding years to your home mortgage. If you need to refinance your loan to avoid losing your property, however; then paying more in the next couple of years might just be worth it.<< Back to the list.
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