Is Home Refinance For You?

By: Rony Walker

As long as you have a stable job, earning $23,000 a year and have good credit history, you are eligible for home refinance opportunities. Know the advantages and disadvantages of another loan to get a better deal.

Are you ready for a home refinance?

People are better off using their homes as equity for future assets than getting home refinance to pay off bad credit card debts. There are nightmarish tales of foreclosures because of unrealistic borrowing reasons. Repeatedly, it is wise not to use your home as equity, no matter how bad things seem at present.

Unless you have read the fine print, and gained from your previous experience and learned from it, and have found the better deal then you are ready for a new loan.

A warning to all: getting a home refinance to pay off credit card debts and other financial liabilities will not assure you that you can solve the financial mess you're in. Unless you stick to a strict budget for years, you can make it, if not, then your loan was not worth all your effort.

Should you home refinance?

Examine your motive for home refinancing. There is no point in jeopardizing your and your family's future.

These questions will guide before you decide for a loan:

- Is it wise to put up my house as equity to pay off bad credit card debts?
- How much lower will the current monthly payment be?
- Will I be staying in this house after I home refinance?
- How much will it cost?
- Can I afford it?
- What are the risks?
- Will we be able to cope with a new lifestyle?

Points to consider

Instead of targeting plushy homes way above your means, focus on your small home. It is foolish to get those flashy homes only to lose it in a foreclosure. Be realistic.

Like your previous loan, continue to check out the variable rates, as these can be complicated. Be wary of loans that have ridiculously low rates for the first few months. You will end up paying more, and this is not what you want.

Avoid refinance with the same company. Instead, ask the lender to consider lower payments on your existing loan. Never allow them to bulldoze you with a new loan. There will be hidden expenses, higher interest rate, or a costly closing cost.

If you are going to another company, be sure to get a 2% lower rate compared to your current loan. The matter here is not merely the 2% lower rate but when are you going to break even? If not, the whole exercise is futile.

Avoid the nightmare

Knowing how to deal with lending companies should help. There are borrowers who allow themselves to be bamboozled into bad deals because they fear they would not get their loans approved.

A friendly advice though, once you get the loan, get rid of the credit card shopping binges, or your nightmare will begin. Home refinance should be a useful tool to help you have a stable future, not drown in a financial whirlpool.

Now ask yourself, are you ready for another loan?

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