I’ve written at least one blog here (probably more) about the reasons that it’s a good idea to refinance a loan. All of them focused on some carefully mulled over ideas like a renovation to a kitchen or bathroom that will increase your asking price.
As the title to this installment implies, there’s always a flip side to every real estate transaction and refinancing a mortgage is no exception. That said, here’s a few reasons why you should never consider signing on the dotted line for one of these.
Consolidate Your Loans
If lenders had red police lights in their offices, they’d all start flashing when someone came in for a refinance because of their debt. The thinking behind this is simple. If you’ve got yourself in trouble with the amount you owe for a variety of reasons, paying off high interest rate loans might seem like a good move, but watch out for the trapdoor here.
Remember this move often means transferring debts from things like credit cards to a product that’s backed by your house. Not paying off your credit card debt can have consequences but none of them are as bad as foreclosure.
Reducing Your Payments
Here’s another one of those scenarios that looks good until you kick the tires a bit. Knocking down the payments you make on a monthly basis by taking a bite out of the interest you pay makes sense but don’t forget refinancing a mortgage comes with its own bill. There are closing costs, fees and even additional mortgage payments. The best idea here is to take the time to look at this option from every angle.
Refinancing a mortgage is a good move in the right circumstances but it’s not always a win-win choice. You need to be careful and look at all of your options and the consequences.
