As the mortgage industry is working hard to recover from the economic crisis, mortgage rates have fallen to all time lows and money management experts would recommend refinancing now, if possible. This is due mainly to the fact that, in addition to the low interest rates, many banks are offering incentives to people looking to refinance. However, personal finance management experts would caution borrowers to beware of hidden obstacles.
A large number of banks and credit unions are offering fee waivers, lowered rates and other innovative ways to cut loan prices for refinancers. This may look like a good idea, but personal finance management pros caution that refinancing may have unexpected consequences, the most important of which is that they loan length may be extended back out to 30 years. While a borrower may not end up paying as much over the life of the loan as before the refinance, it is still a longer time until the loan is repaid. This is an important consideration for those approaching retirement.
When looking at money management over the long term, it’s important to consider the length of the new loan under a refinance. Homeowners should carefully consider whether the overall savings balances out with the additional time paying on the mortgage. In addition, borrowers should be aware that many of the incentives that banks are offering are designed solely for those who have large down payments, low debt levels, and high credit scores. Even with the best personal financial management, these requirements can be difficult to meet. No matter what a homeowner decides though, and no matter the homeowner’s money management skills, there is a refinance option available for most people, but keep in mind that there might be obstacles, such as high credit scores, that could make it more of a challenge.
Photo © zimbio
