Caution, When You Refinance Your Home Mortgage It Might Cost You

It may sound like a great way to consolidate your debt. You have a home mortgage and you can refinance it to incorporate your credit cards and other unsecured debts. That way you have one bill to pay. This sounds like a reasonable and practical way to handle your finances, right. If you do not take into consideration all of the possible financial variables when you refinance your home mortgage you could end up paying more than what you were paying originally in the long run.

First, do not go on a refinancing binge. For one thing, taking out new mortgages every time the interest rates drop is a sure formula for putting yourself deeper in debt. In other words, just because you "can" refinance your home mortgage, doesn't mean that you should. There is a law on the books since 2010 that is there to protect you in your refinancing efforts if you have determined that this is the best option for you. A Good Faith Estimate is a estimate of what the loan will cost you that the lender is required to give you up front if you ask for it. The must guarantee that they will stick with this estimate, even if the rates change.

When you refinance your home mortgage there can be tons of what is called "garbage" fees. These fees are a conglomeration of administrative, processing, application, and processing fee. There may be other fees that the lender tacks on. These types of fees are not "required" and a savvy borrower will negotiate them rather than accept them at face value. If you see something on your closing statement that says "paid outside of closing" and it is called a YSP this is money that the lender pays the broker for getting you to take your loan out with them. Mortgage brokers get paid for your business by the banks.

Always make sure that you weigh the cost of the loan against what you are going to save. The fees that are mandatory may be bigger than your savings in the long run. If you are paying out more for your loan than you are saving, it is not worth it no matter how low the interest may seem. Also, consider how long you are taking the loan out for. If you are refinancing, what was originally a 30-year loan 15 years into the mortgage for another 30 years, it has now become a 45-year mortgage. From the day you originally borrowed to buy your home, 15 years ago, until the new loan you just refinanced your home mortgage with is paid off will be 45 years. This is why it is so important to deeply consider your options before refinancing because almost half-a-decade is a long time to pay on any loan.